Japan to classify cryptocurrency as financial products, reports say.
Japan is gearing up to redefine cryptocurrencies as financial products, making them investment assets rather than instruments for settlement by 2026. The move aims to bring cryptocurrencies under the umbrella of insider trading rules that currently regulate traditional financial markets.
A recent report from Nikkei highlights that the Financial Services Agency (FSA) of Japan anticipates submitting a bill to parliament by 2026, amending the Financial Instruments and Exchange Act to categorize cryptocurrencies as financial products. This shift comes as an essential step to align the legal landscape with the growing popularity of crypto trading and reduce vulnerabilities to market manipulation.
Currently, under the Payment Services Act, cryptocurrencies are largely viewed as payment tools instead of investment vehicles. However, the proposed reclassification would change this perspective, reshaping cryptocurrencies like Bitcoin (BTC) as investment products. This transition would necessitate companies seeking investment in cryptocurrencies to acquire licenses from regulators, not just the exchanges facilitating transactions. The licensing requirement could serve as a protective measure for consumers amidst increasing complaints of crypto-related scams.
Moreover, the reclassification would extend insider trading regulations to encompass cryptocurrency markets, fostering a more transparent trading environment. This move reflects a global trend as various governments examine establishing similar regulatory frameworks for insider trading in cryptocurrencies. Notably, in 2023, the International Organization of Securities Commissions (IOSCO) urged regulators worldwide to enforce insider trading rules to oversee trading activities involving digital assets, akin to supervising stock and bond markets.
Highlighting the proactive stance of Japan towards cryptocurrencies, the country has seen a surge in crypto adoption, with more than 7.34 million active crypto accounts reported as of January 2025. Recently, Japan has demonstrated its favorability towards cryptocurrencies, evidenced by the issuance of the initial stablecoin trading license to SBI VC Trade. This license permits the platform to support Circle’s USDC, indicating the country’s openness to embracing digital assets.
Furthermore, Japan’s ruling Liberal Democratic Party is advocating for tax reforms in the crypto space. One such proposal includes reducing the existing hefty crypto capital gains tax from 55% to a more moderate 20% while recognizing digital assets as a distinct financial asset class. Additionally, Japan is contemplating easing restrictions on crypto exchange-traded funds (ETFs), aligning with Hong Kong’s supportive stance towards cryptocurrencies.
In conclusion, Japan’s upcoming initiative to classify cryptocurrencies as financial products underlines its commitment to fostering transparency, investor protection, and regulatory clarity in the dynamic cryptocurrency landscape. This move signifies a significant step towards integrating cryptocurrencies into mainstream financial markets, paving the way for enhanced regulatory oversight and consumer safeguards.