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Ahmed Barakat
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Japan is implementing the most significant regulatory pivot for cryptocurrencies in Asia. The country that has taxed crypto gains by up to 55%, which has pushed liquidity offshore and cemented its reputation as a jurisdiction hostile to active traders, has now published new rules allowing foreign trust-type stablecoins to operate as regulated payment instruments starting June 1. It is an obvious part of a much larger regulatory reform package taking shape from Tokyo.
Until last year, the Japanese National Tax Authority currently treated most cryptocurrency gains as “miscellaneous income” in a category subject to progressive rates of up to 55% in the top bracket. This explains why high-frequency traders, market makers and Web3 startups have been migrating to Singapore and Dubai for years.
The proposed reform targets a flat settlement tax of 20%, which is similar to the rate applied to stocks and investment funds under Japan’s Financial Instruments and Exchange Act (FIEA). The Japan CryptoAssets Business Association has been explicit in its position papers: competing Asian hubs tax retail crypto gains at between 0 and 15%.
But the tax rate is only half the mechanism. The other half is legal reclassification. For the 20% rate to apply, crypto assets, especially large tokens such as BTC and ETH, would have to be reclassified as financial instruments under the FIEA rather than remaining within the more flexible framework of the Payment Services Act. This has subsequent consequences: it makes spot and derivative ETFs legally viable, managed by licensed financial instrument business operators.
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The American precedent is the reference point from which every Japanese regulator operates. US-listed Bitcoin ETFs, approved by the Securities and Exchange Commission in January 2024, attracted institutional inflows in the billions within weeks of their launch, validating a market structure that Japan has been unable to replicate under its current legal framework.
European UCITS structures have followed a parallel path, with major asset managers building crypto exposure products regulated within neighboring MiCA frameworks.
The institutional foundation in Japan is well underway, with Nomura’s digital assets subsidiary Laser Digital and Mitsubishi UFJ Trust and Banking piloting securities and token financing units within existing FIEA frameworks. They have publicly argued that similar structures could be applied to define Bitcoin and Ethereum products once classification and taxation rules align.
As it happens this week, SBI Holdings has applied for cryptocurrency ETF products in Japanpositioning itself at the forefront of what will become a structurally new domestic market.
The stablecoin framework released by the Financial Services Authority on June 1 is part of the same institutional logic. SBI VC Trade is actively exploring licensed services incorporating USDC under the new rules, which reclassify eligible foreign stablecoins as electronic payment instruments under the Payment Services Act. These regulated stablecoin bars, licensed brokers, and parity standards for foreign issuers provide the settlement layer that a functional ETF market needs.
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Regulatory reform does not happen in isolation. Across the Pacific, the US Senate Banking Committee has advanced the Clarity Act, which sets jurisdictional boundaries between the Securities and Exchange Commission and the CFTC. Alex Thorne, head of company-wide research at Galaxy Digital, estimates the likelihood of the CLARITY Act becoming law in 2026 at 65% to 75%.
The EU’s MiCA framework already exists. Hong Kong launched Bitcoin and Ethereum ETFs before Japan. Singapore maintains 0% capital gains on cryptocurrencies. Japan’s advantage is not speed; Rather, it is deep, as Japan’s domestic savings pool is estimated in the trillions.
Latham and Watkins analysts have described Japan’s trend as a convergence toward a “rules first but tolerant of innovation” stance, closer to MiCA in philosophy than to the ongoing jurisdictional battles in the United States.
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