The Financial Services Agency (FSA) of Japan has confirmed a comprehensive plan to officially classify cryptocurrencies as financial products, while simultaneously advancing a highly anticipated tax reform—slashing the capital gains tax on cryptocurrencies from the current maximum of 55% down to 20%.
This major policy shift is expected to be legislated in 2026, marking the most significant regulatory change in Japan’s crypto landscape since the Mt. Gox era.
01 Tax Reform Details: From "Miscellaneous Income" to Financial Product Status
Japan’s current crypto tax regime treats digital assets as "miscellaneous income," resulting in tax burdens as high as 55% for high-earning traders—making it one of the highest crypto tax rates in the world.
Under the new proposal, 105 cryptocurrencies that are reclassified as financial products will see trading profits taxed at a flat 20% rate, aligning with the treatment of stock transactions.
This change will benefit not only individual traders but also banks and insurance companies that sell cryptocurrencies through their securities subsidiaries.
The FSA plans to submit these amendments at next year’s regular Diet session, aiming to implement the tax reform in the following fiscal cycle. The new rate could take effect as early as 2026.
02 Regulatory Upgrade: Cryptocurrencies Become Financial Products
The FSA intends to reclassify 105 cryptocurrencies—including Bitcoin and Ethereum—as financial products under the Financial Instruments and Exchange Act.
This reclassification means these digital assets will be subject to the same disclosure, reporting, and market oversight standards as traditional securities.
Exchanges will be required to publish detailed information on each cryptocurrency, including whether there is an identifiable issuer, the underlying blockchain architecture, and characteristics of price volatility.
Significantly, Japan will introduce explicit insider trading rules to the crypto sector for the first time.
Issuers, exchange executives, and related parties will be prohibited from trading tokens based on non-public information, such as planned listings, delistings, bankruptcies, or other major events.
03 Market Impact: Why Japan’s Crypto Market Is Poised for Transformation
The impact of this tax reform on Japan’s crypto market cannot be overstated.
High tax rates have long been the main barrier preventing institutional and individual investors in Japan from fully participating in the crypto market.
Reducing the tax rate from 55% to 20%, bringing it in line with equities, will significantly ease the tax burden for both retail and institutional investors, boosting Japan’s competitiveness in regional and global crypto markets.
At the same time, the FSA is considering relaxing restrictions on financial institutions, allowing banks and insurance companies to sell cryptocurrencies to depositors and policyholders through their securities subsidiaries.
This move will further bridge the gap between traditional finance and digital assets, fostering mainstream adoption.
According to statistics, the number of registered crypto accounts in Japan surpassed 12 million as of early 2025, signaling strong market growth potential.
04 Market Status: Short-Term Volatility and Long-Term Trends
Despite the long-term policy tailwinds, the crypto market has recently experienced widespread corrections.
As of November 18, the price of Bitcoin fell by 3.08%, dropping below the $92,000 mark and temporarily erasing all gains for the year.
Ethereum also declined by 2.93%, briefly falling below the psychological $3,000 threshold.
Market-wide declines ranged from 2% to 7%, with the Layer2 sector leading the drop at 7.13%. Starknet (STRK) and SOON (SOON) fell by 21.17% and 30.60%, respectively.
This short-term volatility stands in stark contrast to Japan’s long-term regulatory clarity and tax reform, creating opportunities for investors to enter the market under a more favorable tax regime.
05 New Opportunities for Financial Institutions: Banks Enter Crypto Directly
Japan’s regulatory transformation goes beyond tax reform. The FSA is also exploring the possibility of allowing banking groups to directly register as licensed crypto exchanges, enabling them to offer trading, custody, and other digital asset services in-house.
Under current regulations, banks are effectively barred from holding cryptocurrencies due to strict capital and risk management requirements.
However, rising institutional interest and shifts in global regulatory standards have prompted the FSA to reconsider these restrictions.
Major banks are already taking action—Mitsubishi UFJ Financial Group, Sumitomo Mitsui Banking Corporation, and Mizuho Bank have begun collaborating to issue stablecoins pegged to the yen and the US dollar.
Additionally, Japan’s first locally regulated stablecoin, JPYC, was launched on October 27.
06 Gate Exchange Perspective: Strategic Importance of the Japanese Market
For platforms like Gate, the Japanese market is strategically vital. According to Gate’s Q1 financial report, its trading volume in Japan (including partner exchanges) reached 994,000 BTC, surpassing analyst expectations.
Meanwhile, the Japanese user base (including partner exchanges) grew to 481,000, again exceeding forecasts.
Gate’s CEO previously stated that the company is actively expanding globally, with Japan positioned as a key hub for entering the Asia-Pacific region.
Unlike previous efforts to enter Southeast Asia directly under a local brand, Gate now relies on its Japanese subsidiary to lead the way, partnering with Japan’s top three fintech companies and leveraging regulatory advantages to address compliance challenges.
Japan’s crypto market is valued at approximately 1 trillion yen, far outpacing other Asian countries and offering significant growth potential for exchanges.
07 Investor Perspective: Strategic Adjustments Under Tax Reform
For crypto investors operating in Japan, these changes mean a need to reassess investment strategies.
In the short term, the market may continue to experience volatility, but the long-term policy environment is becoming increasingly favorable.
Investors should pay close attention to the 105 cryptocurrencies designated as financial products by the FSA, as these assets will benefit from lower tax rates and a clearer regulatory framework.
Moreover, as traditional financial institutions enter the crypto market through subsidiaries, investors will have opportunities to access digital assets via more familiar channels, potentially driving further mainstream adoption.
Outlook
The impact of tax reform goes far beyond the numbers. Japanese company Metaplanet has already taken action, not only adopting Bitcoin as a treasury reserve asset but also launching Bitcoin-backed financial products to generate returns in Japan’s low-interest environment.
As 2026 approaches, Japan is steadily transforming itself into a welcoming hub for the global crypto industry—and the unified 20% tax rate is just the beginning of this new chapter.
