The Japanese parliament has approved amendments to the Financial Instruments and Exchange Act, shifting the regulation of cryptocurrencies into the realm of investment legislation, according to NHK.
The main provisions will take effect within a year of publication. Authorities will define the details through cabinet orders and supervisory instructions.
Previously, the primary legal framework viewed digital assets mainly as a means of payment. Now, the law categorizes them as a distinct type of financial instrument, separate from securities. Stablecoins will still be classified as electronic payment instruments.
Trading
The amendments introduce a specific ban on trading using substantial non-public information. This will apply to assets traded on registered cryptocurrency platforms in Japan.
Insiders may include employees of issuers, trading platforms, and other market participants who have access to information about listings, trading halts, project changes, and major transactions.
Companies issuing cryptocurrencies will be required to provide data prior to issuance, publish information on significant events, and release annual reports. For assets without a defined issuer, such as Bitcoin, registered trading platforms will handle the disclosure of information.
The law also increases penalties for operating without registration. The maximum prison sentence will rise from three to ten years, and the upper limit for fines will increase from 3 million yen ($18,500) to 10 million yen ($61,600).
Taxes
Tax changes are outlined in a separate reform and are not directly included in the approved amendments. The proposed model suggests separate taxation at a rate of 20.315% and allows losses to be carried forward for up to three years.
The new regime is planned to apply only to specific crypto assets traded through registered operators in Japan. The final list of coins and the accounting procedures will be approved separately by the authorities.
Income from staking, lending, and NFT transactions is expected to continue being taxed as other income under the existing progressive scale. The tax changes are planned to take effect on January 1, 2028.
Crypto ETFs
Bringing crypto assets under the Financial Instruments Act also creates a legal framework for the emergence of spot exchange-traded funds (ETFs). According to media reports, the Japan Exchange Group is considering the first listings of crypto ETFs as early as 2027. Potential issuers could include traditional financial organizations.
However, the adoption of the amendments does not automatically mean approval for funds based on Bitcoin or other cryptocurrencies. Additional regulations, regulatory decisions, and listing rules will be required for their launch.
In March, the Bank of Japan began experimenting with blockchain technology for its integration into the financial infrastructure. As part of the project, a sandbox has been launched where the regulator tests settlements in the form of deposits in current accounts using distributed ledgers.