Japan’s Financial Services Agency (FSA) is considering reclassifying crypto assets as financial products under the Financial Instruments and Exchange Act (FIEA), a move that could potentially reduce capital gains tax on crypto to a flat 20%. This significant regulatory transformation was announced in a policy proposal released on June 24, as reported by Coinpost.
The FSA’s proposal includes the formation of a working group to explore the possibility of shifting crypto regulation from the current Payment Services Act to the more stringent FIEA. This proposal is scheduled to be discussed at the Financial System Council’s plenary session on June 25.
If approved, the reclassification would introduce a flat capital gains tax rate of around 20% for crypto, aligning it with stocks and alleviating the tax burden compared to the current tax regime, where rates can go up to 55%. Additionally, this change could pave the way for potential domestic Bitcoin exchange-traded funds (ETFs).
This regulatory shift is part of Japan’s broader strategy to enhance its reputation as an investment destination and drive growth in the Web3 and crypto sectors. The government’s revised 2025 “New Capitalism Grand Design and Implementation Plan” emphasizes the importance of responsible development of Web3 businesses in addressing societal challenges, increasing productivity, and leveraging global opportunities for Japanese cultural and regional assets.
Furthermore, the proposed reclassification aligns with Japan’s ongoing efforts to refine the classification and governance of digital assets. The FSA has recently introduced a draft framework that categorizes crypto assets into two types based on their purpose and level of decentralization. Type 1 tokens, used for business or fundraising, would be subject to stricter disclosure rules to protect investors, while Type 2 assets like Bitcoin and Ethereum, considered decentralized and non-fundraising, would be primarily monitored through exchange oversight.
In parallel to these regulatory developments, Japan is making significant strides in advancing its digital financial ecosystem. The digital yen pilot program, launched in 2023, is progressing smoothly, indicating the country’s commitment to embracing digital currencies and technologies.
Overall, Japan’s potential reclassification of crypto assets as financial products under the FIEA represents a significant step towards fostering a more conducive regulatory environment for the crypto industry and positioning the country as a key player in the global digital economy.