Bitcoin and Ethereum have been reclassified as financial products after Japan’s parliament approved amendments to the Financial Instruments and Exchange Act in a plenary session on Wednesday.
Regulatory Overhaul
The new legislation removes digital assets from the Payment Services Act, which since 2017 treated them primarily as payment methods. By placing crypto alongside stocks, bonds, and investment trusts, the amendment creates the most extensive shift in Japan’s crypto framework to date. The change aligns the treatment of blockchain‑based assets with traditional securities regulations.
Tax Reform
Japan’s former crypto tax regime taxed gains as miscellaneous income, imposing progressive rates that could reach roughly 55 % for retail investors. The revised law replaces that structure with a flat 20 % tax rate, identical to the levy on stock‑market profits. Additionally, investors can now carry forward crypto losses for three years, mirroring the loss‑carry provisions available to securities traders.
Investor Outlook
Lowering the tax burden and granting loss‑carry benefits are expected to attract both domestic and foreign investors back to the Japanese crypto market. The alignment with equity taxation may reduce the incentive for traders and startups to relocate abroad. As a result, the market could see increased liquidity and heightened interest in Bitcoin, Ethereum, and other blockchain assets.