Japan Moves to Reclassify Bitcoin Under Securities Law, Slashing Taxes and Opening Path for ETFs

Japan is taking decisive steps toward a groundbreaking shift in its cryptocurrency regulations, as its Financial Services Agency (FSA) proposes moving Bitcoin and other digital assets under the Financial Instruments and Exchange Act (FIEA), a move that could reshape the nation’s financial landscape.

Announced in a proposal released on June 24, the reclassification would treat digital assets like traditional financial instruments—bringing them under the same legal framework as stocks and bonds. This transition promises sweeping changes, including lower taxation and the introduction of Bitcoin ETFs, making Japan a potentially attractive hub for global crypto investment.

Key Regulatory Shift

Currently, digital assets in Japan are governed under the Payment Services Act. The FSA’s working group, formed in April, has been exploring whether Bitcoin should fall under the FIEA instead—marking a shift from a transactional payment view to one of investable securities.

If approved, Bitcoin would receive enhanced legal status, including greater protections for investors and clearer compliance structures for crypto exchanges. Notably, such a move would also enable the legal creation and offering of Bitcoin Exchange-Traded Funds (ETFs) in Japan, following similar paths in the U.S., Hong Kong, and Singapore.

“The FSA aims to strengthen investor protection and market transparency while encouraging broader participation by both institutional and retail investors,” a government official told Nikkei Asia.

Tax Reform: From 55% to 20%

One of the most impactful implications of this proposal is a substantial tax overhaul. Under the current system, profits from crypto are taxed as miscellaneous income, with rates that can soar up to 55%. The new classification under FIEA would reduce that burden to around 20%, aligning it with capital gains on equities.

Analysts describe this as a “game-changer” for Japan’s crypto market, which has long been hampered by its harsh tax treatment.

“Lowering the tax rate to match that of stock trading will not only encourage compliance but attract long-term investors,” said Yusuke Ito, financial strategist at Nomura Securities.

ETFs and Institutional Growth

With this change, Bitcoin ETFs—investment products that track the price of Bitcoin without requiring direct ownership—could be approved by Japanese regulators. These instruments offer exposure to Bitcoin through traditional brokerage accounts, enabling safer and more familiar access for both individual and institutional investors.

Market watchers suggest that ETF approval could usher in a flood of capital into the Japanese crypto space, similar to the wave seen in the U.S. after its spot Bitcoin ETFs were approved in January 2024.

Backed by National Strategy: “New Capitalism 2025”

The move aligns with Japan’s broader national roadmap, the “Grand Design and Action Plan for a New Form of Capitalism 2025,” which emphasizes the role of Web3 technologies, NFTs, and digital assets in solving socioeconomic challenges and spurring innovation.

This initiative positions digital finance as a growth engine and aims to create a more competitive, open, and innovation-driven digital economy.

The plan includes:

• Promoting NFT adoption in cultural industries
• Tokenizing real-world assets to boost regional economies
• Creating a Web3-friendly legal infrastructure to attract talent and capital

Global Influence and Domestic Pressure

The decision also reflects pressure from global developments. The U.S. and other nations have moved swiftly to embrace regulated crypto frameworks and institutional-grade products like ETFs. Earlier this year, Japanese firm Metaplanet shifted its $5 billion Bitcoin acquisition plan to its U.S. subsidiary, citing limitations in Japan’s regulatory environment.

“Japan will be the R&D center, while the U.S. becomes another capital aggregation and BTC acquisition engine,” wrote Adam Livingstone, Metaplanet analyst, in a note to shareholders.

The Japanese government appears determined not to be left behind in the rapidly evolving digital finance race.

Timeline and What Comes Next

If the Financial System Council gives a green light this week, a formal draft bill is expected to be submitted to Japan’s National Diet before year-end.

Impact on Market and Investors

For institutional investors, this represents a long-awaited green signal. Clear regulation, ETF availability, and favorable tax treatment could prompt deeper involvement from Japanese banks, asset managers, and pension funds.

For retail investors, the reforms would ease access through regulated instruments and reduce their tax burden—making crypto trading more attractive and less risky.

Economically, Japan could emerge as a Web3 innovation hub, attracting capital, startups, and global crypto firms.

Final Thoughts

Japan’s proposed regulatory overhaul is not just a policy update—it’s a strategic realignment. By giving Bitcoin the status of a legitimate financial product, slashing punitive taxes, and opening doors to ETFs, Japan aims to be a frontrunner in the global digital economy.

If executed successfully, this move could unleash a new wave of investment, innovation, and international collaboration—positioning Japan as a beacon of regulatory clarity and financial modernization in the crypto era.

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