Japan plans to classify cryptocurrencies as financial products

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Japan plans to regulate crypto

Bringing Crypto Under Traditional Financial Law

Under the proposed changes, cryptocurrencies would not be grouped with traditional securities like stocks or bonds but would be treated as a distinct class of financial products. This shift would enable authorities to apply rules prohibiting insider trading, thereby extending to digital assets protections already enforced in equity markets.

If enacted, companies offering cryptocurrency-related services in Japan would be required to register with the FSA, aligning them more closely with conventional financial institutions. However, the FSA has not yet clarified how the law would apply to foreign crypto firms operating without a physical presence in Japan.

Details on how various types of digital assets would be treated—particularly the distinction between major cryptocurrencies like Bitcoin (BTC) and Ether (ETH) and riskier tokens such as memecoins—are still under discussion.

Broader Push for Pro-Crypto Reform

This regulatory move is the latest in a series of pro-crypto initiatives by Japanese authorities. Earlier in March, the FSA granted its first license for stablecoin operations to SBI VC Trade, a subsidiary of financial giant SBI Holdings. The firm is preparing to support Circle’s USDC, signaling a cautious but growing embrace of blockchain-based payment solutions.

Japan’s ruling Liberal Democratic Party is also working to make the country more competitive as a digital asset hub. Recent proposals include lowering the capital gains tax on crypto profits from 55% to 20%, and classifying digital assets as a separate asset class—an effort to ease the burden on investors and promote domestic innovation.

Additionally, in February, reports surfaced that the FSA was considering lifting Japan’s ban on crypto-based exchange-traded funds (ETFs), aligning the country with jurisdictions like Hong Kong, which approved crypto ETFs in April 2024.

Looking Ahead

If the proposed changes move forward, Japan will join a growing list of major economies redefining how cryptocurrencies are treated under the law. The effort aims to balance investor protection with innovation, potentially reinforcing Japan’s role as a regulatory leader in the global digital asset space.

Still, significant questions remain—particularly around the enforcement of these rules across borders and how regulatory distinctions will be drawn between different types of digital tokens. As the FSA finalizes its framework, the crypto industry will be watching closely.

Recently we wrote, that the U.K.’s Financial Conduct Authority (FCA) is preparing to roll out a significantly stricter set of crypto regulations by 2026.

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