Japan on track for crypto tax overhaul as Bitcoin nears financial‐product status

Japan’s government might finally be ready to treat crypto like it actually belongs in the financial world.

The Financial Services Agency (FSA) is preparing to label Bitcoin, Ethereum, and 103 other tokens as financial products, according to what sources told Asahi Shimbun.

That move would slam the door on the outdated system that’s made crypto trading in Japan a tax nightmare for years. If approved, these coins will fall under the Financial Products Transaction Act, putting them in the same legal category as stocks and bonds.

The report said the FSA is also pressing for a lower tax rate that would apply to gains from these assets.

“The FSA will also ask the government to enforce tax rate reductions ahead of the next financial year,” the report noted, adding that the proposed rules would mirror those currently used in equity markets.

If this goes through, it means the insane 55% tax rate some traders currently face could drop to a flat 20%.

FSA targets crypto tax cuts, insider trading crackdowns

Under current rules, Japanese crypto profits are treated as “miscellaneous income.” That’s how a 55% tax bill shows up in your life if you’re in the top income bracket and make a serious gain trading crypto.

Unlike other countries that treat crypto like stocks and apply capital gains tax, Japan still forces residents to report earnings as if they’re running a side hustle.

But the FSA wants that to end. If the new classification is approved, all 105 selected coins would be taxed at just 20%, no matter how much profit is made. That would finally align Japan with how most developed economies handle crypto earnings.

The FSA hasn’t confirmed anything publicly yet. But according to Asahi, the selection process for these 105 coins was not random. Tokens were screened for transparency, financial stability, issuer reputation, technical strength, and how risky their price movement is. No memecoins made it in just for vibes.

The changes won’t stop at taxes either. The FSA is reportedly preparing to crack down on insider trading in the crypto space. Asahi said the agency wants to ban any trading done by people or companies who know “important facts” about a coin before that information is public.

That includes stuff like a listing date or financial updates from the coin’s issuer. The FSA aims to push all of this through before Japan sets its 2026 budget. That timeline gives lawmakers just over a year to bake the proposals into law.

The Japan Virtual Currency Exchange Association (JVCEA) also plays a big role in determining what counts as legit in the space. It runs a “green list” of coins that meet certain standards. Right now, the list includes Bitcoin, Ethereum, XRP, LTC, and MATIC, totaling 30 coins.

To make it onto that list, coins must be listed by at least three JVCEA exchange members. Or they must have been listed by one member for at least six months. The JVCEA must also approve the coin as “appropriate” for unconditional listing.

The smartest crypto minds already read our newsletter. Want in? Join them.