Japan To Treat Bitcoin Like Stocks With Flat 20% Tax And New Rules For ETFs And Stablecoins

Japan Prepares Major Shake-Up To Cryptocurrency Tax Rules

Japan’s top financial regulator is preparing a major overhaul of how cryptocurrencies are taxed, in what could be the most significant reform to the sector since digital assets were first brought under oversight a decade ago.

Flat 20% Tax On Crypto Gains Proposed

The Financial Services Agency (FSA) is drawing up plans to shift cryptocurrency profits into the same tax bracket as stocks and foreign exchange.

Instead of being lumped into “miscellaneous income” and taxed at progressive rates that can reach 55%, crypto gains would be subject to a flat 20% levy.

Industry groups have long pressed for this change, saying the current framework is driving both retail traders and startups away from Japan.

The Japan Cryptoasset Business Association has also called for losses to be carried forward for up to three years, just as investors in equities are allowed to do.

Paving The Way For Crypto ETFs

Alongside the tax shake-up, the FSA intends to reclassify cryptocurrencies as financial products under the Financial Instruments and Exchange Act.

At present, they are treated primarily as a form of payment under the Payment Services Act, a system that limits investment products built around them.

The legal shift would open the door to domestic exchange-traded funds (ETFs) tied to crypto markets.

Japan’s ETF market already exceeds ¥80 trillion ($560 billion), but so far investors have been forced to seek crypto exposure through products abroad, such as US-listed bitcoin ETFs.

First Yen-Backed Stablecoin Nears Approval

The regulator is also expected to sign off on the country’s first yen-denominated stablecoin this year.

The token, called JPYC, will be issued by Tokyo-based fintech JPYC Inc. and aims to roll out ¥1 trillion ($6.8 billion) worth of tokens within three years.

To comply with rules introduced in June 2023, the new stablecoin must be fully backed by bank deposits and issued by a licensed entity.

JPYC has already partnered with Minna Bank, part of Fukuoka Financial Group, to meet these requirements.

From Investor Protection To Market Growth

Japan’s cautious stance on crypto was shaped by crises such as the Mt. Gox collapse in 2014 and the Coincheck hack in 2018, after which strict custody and licensing rules were imposed.

These safeguards allowed Japanese users of FTX Japan to withdraw their assets normally even as the global exchange collapsed in 2022.

Officials now say the country is ready to move beyond defensive regulation and build a stronger domestic market.

By aligning tax policy with equities, recognising crypto as a financial product, and approving stablecoins, the FSA is setting the stage for both retail and institutional adoption to deepen in the years ahead.