Japan wants to reform crypto legislation: stricter rules, lower taxes

Japan’s Financial Services Agency (FSA) is preparing a major overhaul of crypto legislation. The regulator wants to officially classify digital assets as financial products, which means stricter rules will apply.

With this proposal, Japan wants to provide more clarity and protection to consumers and investors. The planned amendment to the law is expected to be submitted to parliament for approval in 2026.

Stricter information requirements for 105 cryptocurrencies

A key part of the plan is that 105 cryptocurrencies traded on Japanese exchanges will be subject to new disclosure rules. Exchanges must provide extensive information about each token, such as the issuer, the blockchain technology used and the risk profile.

For the first time, these digital assets are also included under insider trading rules. Persons with non-public information about, for example, upcoming listings or financial problems with a project are no longer allowed to act on that knowledge.

New tax rules should make the market more accessible

In addition to stricter regulation, the FSA is calling for an adjustment to the tax on crypto profits. Currently, crypto income is taxed as other income, with rates of up to 55 percent.

The proposal is to tax profits on the 105 approved cryptocurrencies like shares, at a fixed rate of 20 percent. With this, the regulator wants to make the market fairer and more attractive for traders.

Regulation aimed at tackling abuse

An important goal of the new bill is to prevent abuse in the crypto market. By banning insider trading for anyone with sensitive, non-public information, the FSA aims to increase confidence in the sector.

The measures should contribute to a more stable market in which investors are better protected against unauthorized trading practices.

Japan is exploring a greater role for banks in the crypto sector

The FSA is also examining whether banks may hold cryptocurrencies as an investment product in the future. This is currently prohibited due to volatility, but the regulator is considering relaxing the rules.

The FSA is also investigating whether banking groups may register as crypto exchanges, so that they can offer trading and custody services themselves. This would mark a major shift in Japan’s financial sector.