Japan’s Cabinet has approved a bill that would treat cryptocurrencies as financial instruments, marking a major shift in how the country regulates digital assets.
In Japan, regulators long regarded cryptocurrencies as a type of “property value” that people could use to make payments under the Payment Services Act. There were no explicit investment laws or criteria for market exploitation in that system, which concentrated on exchanges as payment service providers.
The Financial Instruments and Exchange Act, which also regulates stocks and bonds, will now apply to cryptocurrency under the new Cabinet-backed legislation. The plan will now be discussed by Diet lawmakers; if approved, full implementation is anticipated in 2027.
105 major cryptocurrencies, such as Bitcoin and Ether, traded on Japanese exchanges would be categorized as financial instruments under the rule. This classification puts them on the same legal footing as traditional securities and derivatives in Japan.
New Rules for Trading and Disclosure
Regulators can access instruments they already use in the stock and bond markets by treating cryptocurrency as a financial instrument. The proposed bill expressly prohibits insider trading related to token listings and the dissemination of hidden market‑moving information.
New disclosure obligations for issuers and exchanges would include frequent reporting and public disclosure of important risks. To penalize companies that violate trade or reporting regulations, authorities also implement an administrative penalty system.
Japan’s Financial Services Agency built the bill on recommendations from a working group that met six times through late 2025. That group argued that crypto markets now look more like investment markets than simple payment rails, so they need matching safeguards.
Tax Reform and Institutional Entry
The legal shift ties into a broader tax overhaul that aims to treat many crypto profits as stock-like gains. From 2026, Japan plans to move to a flat 20 percent tax on certain crypto gains, down from a system where rates can reach 55 percent on miscellaneous income.
The new bill also supports earlier changes that let domestic venture capital funds hold crypto directly through limited partnerships. That change could reduce pressure on Japanese Web3 startups to rely solely on foreign funding.
Finance Minister Satsuki Katayama has publicly backed integrating digital assets into Japan’s financial system, including through future exchange‑traded products. Regulators are also studying how to let banks and stock exchanges offer more crypto‑linked services under the tighter rules.
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