Japan Moves to Greenlight Bitcoin ETFs—Crypto Gains Taxed at Flat 20% Rate

Japan’s Financial Services Agency (FSA) is preparing a sweeping change to how cryptocurrencies tax is regulated, a move that could reshape the country’s crypto and Web3 ecosystem.

In a proposal released on June 24, the agency outlined plans to reclassify cryptocurrencies under the Financial Instruments and Exchange Act (FIEA), moving them away from their current treatment under the Payment Services Act.

The change would formally categorize crypto assets as financial products. If adopted, it would reduce crypto taxation from a progressive rate of up to 55% to a flat 20%, the same rate applied to stocks.

The FSA’s proposal is set to be discussed at the Financial Services Council general meeting on June 25. Alongside the tax cut, the shift could also open the door for Bitcoin exchange-traded funds (ETFs) in Japan by removing the current legal barriers.

Japan Recognizes Crypto as ‘Alternative Investment’ in Economic Revamp

According to local outlet CoinPost, this initiative is part of Japan’s wider strategy to position itself as an “investment-based nation.”

The government sees Web3 and crypto assets as tools for value creation and regional development, aiming to foster an environment that supports full-scale digital asset adoption.

The new policy direction also aligns with Japan’s updated “Grand Design and Action Plan for New Capitalism,” which was approved by the Cabinet earlier this month.

The document explicitly supports the growth of Web3 businesses and names them as part of the country’s broader goal of economic revitalization.

The government’s stance is that digital assets should be considered part of a diversified investment portfolio. Officials have described cryptocurrencies as “alternative investments,” pointing to their potential as financial instruments with risk-return profiles different from traditional securities.

“The healthy development of Web3 businesses such as cryptocurrencies will help resolve social issues and contribute to improving productivity,” the government noted in the action plan.

Japan is also looking to tap into the potential of NFTs and Web3 infrastructure to unlock the cultural and economic value hidden in its regions. The FSA report suggests that borderless technologies could help local industries find recognition on a global scale.

Analysts believe the policy shift may also be influenced by changing dynamics abroad. The report points to the supportive stance on crypto taken by the Trump administration in the United States and pro-crypto policies in U.S. states like Texas as part of the backdrop.

If the proposed changes go through, Japan could mark a historic turning point in its Web3 policy, transitioning from a regulatory-heavy framework to one focused on crypto utilization and market growth.

Japan Plans Securities-Style Crypto Rules, Spot Bitcoin ETFs Possible

Japan’s recent crypto tax cut to 20% is just one part of a larger transformation underway in the country’s digital asset landscape.

In early 2025, Japan’s FSA resumed efforts to formally reclassify crypto assets as financial products under the Financial Instruments and Exchange Act, a move that could pave the way for spot Bitcoin ETFs and stricter trading rules similar to those for traditional securities.

This regulatory overhaul follows years of discussions with experts, industry leaders, and lawmakers. In February, the FSA launched a closed-door study group to review how digital assets should be governed, with a reform outline expected by mid-2025 and a potential bill submission by 2026.

If passed, this bill would bring crypto under existing securities laws, enforcing rules around insider trading and market conduct, while also allowing regulated ETFs to be launched.

The move mirrors the U.S. SEC’s approval of Bitcoin ETFs in January 2024, which opened the door for institutional inflows through firms like BlackRock and Fidelity.

Japan is also taking cues from regional players like Hong Kong and Singapore, both of which are evolving their regulatory frameworks to support digital asset growth.

On the taxation front, momentum is building. After the 2023 exemption of corporate taxes on unrealized gains, Japan’s ruling party previously proposed slashing the top crypto income tax rate from 55% to 20%, aiming to attract both individual investors and institutional players.

Industry leaders like Sota Watanabe have publicly supported these reforms, stating that Japan is preparing to regulate crypto as a distinct asset class, not just a financial anomaly.

Taken together, these steps signal Japan’s intent to legitimize and expand its crypto economy, while aligning with global standards.