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Japan’s most comprehensive cryptocurrency market reform has moved into its final parliamentary phase, with the House of Councilors set to vote on legislation that would transform digital asset trading from a payments-focused regime into the country’s main investment market law.
the Formal diet record It shows the House of Councilors Finance Committee approved the bill on July 14. Japan’s lower house of parliament had already passed it on June 11, leaving approval by the full Senate as a remaining parliamentary step.
TL;DR
- Japan moves to regulate cryptocurrencies under FIEA.
- The new rules introduce disclosures and prohibit insider trading.
- The tax reform targets qualifying trades, not all cryptocurrencies.
- Spot ETFs still require separate regulatory changes.
Cryptocurrencies become an investment product, not a security
The reform would move the main rules governing cryptocurrency trading from the Payment Services Act to the Financial Instruments and Exchange Act, reflecting the government’s view that digital assets are now primarily held for investment rather than payment.
This shift does not mean that Bitcoin and other cryptocurrencies will automatically become securities. the Official interpretation of the Financial Services Agency It states that cryptoassets will remain a separate category of financial products, subject to rules tailored to their technical and market characteristics.
Registered cryptocurrency exchanges will be renamed into crypto asset trading companies and placed within a framework similar in many areas to the Japanese securities system. Existing requirements covering custody, cold wallet management, and customer asset protection will remain in place, while operators will face stronger controls over token listings, sales practices, outsourcing, and market monitoring.
The law also requires exchanges to build reserves that can help compensate clients after unauthorized asset outflows. The exact reserve ratios, inclusion criteria and operational requirements will be determined later through Cabinet orders and FSA regulations, meaning that passage alone will not complete the new system.
Disclosing the codes will become a legal obligation
Issuers conducting public offerings of specific crypto assets will need to disclose information before the sale, including the functionality of the token and offering, underlying technology, business structure and financial condition. Material developments would trigger additional notices, while issuers that have raised capital through the offering will generally face annual reporting requirements.
The obligation is narrower than the global reporting base for each blockchain project. Instead, bitcoin and other assets for which there is no traditional issuer will be valued and disclosed by the regulated exchange that chooses to list them.
The framework also recognizes that the token can become sufficiently decentralized. The issuer may apply for an exemption from continuing disclosures when control of the network disperses, after which responsibility for providing relevant market information passes to the trading platform.
This distinction is important because Japan is not trying to impose decentralized protocols on the corporate reporting model indefinitely. Instead, the law assigns responsibility for disclosure to whichever identifiable participant is best placed to provide reliable information at each stage of token development.
Japan imposes a dedicated ban on insider trading of cryptocurrencies
The bill would prohibit trading on material, non-public information involving cryptocurrency assets handled by licensed Japanese platforms. Covered information could include an exchange’s decision to list or delist a token, major events affecting the issuer and planned transactions involving unusually large portions of the cryptoasset supply.
The restrictions will apply to issuers, exchange employees, parties preparing large transactions and persons from whom they receive confidential information. It is also prohibited to share inside information or recommend trading before disclosing it.
Violations can result in penalties of up to five years in prison or a fine of up to 5 million yen, along with administrative financial penalties. Unregistered cryptocurrency operations will face a separate enforcement escalation, with the maximum prison term rising from three to ten years.
The tougher penalty addresses more than just traditional exchange activity. Japan’s securities watchdog will get stronger powers to investigate unlicensed platforms, fraudulent investment promotion, and paid cryptocurrency recommendations that fail to disclose promoter compensation.
The 20% tax rate has important limitations
Japan currently treats most individual cryptocurrency earnings as miscellaneous income subject to progressive national and local taxes that can reach approximately 55%. the government Tax reform plan 2026 It would transfer qualifying gains to a separate 20% regime, consisting of 15% national income tax and 5% local tax, excluding the additional reconstruction tax.
The lower price will not automatically cover every wallet, foreign trade or digital asset transaction. It is designed for crypto assets handled by companies regulated under the amended FIEA and for spot transactions, derivatives and selected ETFs that meet the final legal requirements.
Qualifying losses can be carried forward for three years, allowing investors to offset future profits. This treatment would bring covered cryptocurrency activity closer to listed stocks and regulated derivatives, but the government has not proposed adding cryptocurrencies to Japan’s tax-exempt NISA investment accounts.
Timing also remains conditional. The Financial Services Authority says the tax change will be implemented from January after the amended financial law comes into force. Since the main cryptocurrency provisions are scheduled to come into force on a date set by the government within one year of their issuance, the exact start date of the tax will depend on the final implementation calendar rather than Parliamentary approval alone.
The bill opens the ETF path but does not end it
Moving cryptocurrencies into the FIEA removes a major conceptual hurdle for Japanese spot crypto funds, while the tax package already foresees income from eligible crypto ETFs receiving the same 20% separate treatment.
A domestic Bitcoin ETF cannot start trading just because this bill passes. The Financial Services Authority stipulates that Japan must separately amend the implementation order under the Investment Fund and Investment Corporation Law before investment funds can directly hold eligible crypto assets.
Fund managers will then need to design products, exchanges will have to approve listings, and regulators will still evaluate custody arrangements, valuation, liquidity and investor protection. Claims that the legislation has already legalized spot ETFs therefore overstate what a parliamentary vote achieves.
Implementation will determine the business impact
The reform gives Japan a securities-style framework for disclosures, market behavior and enforcement while maintaining cryptocurrencies as their own legal category. Its practical impact will depend on secondary rules that determine which assets qualify for favorable taxes, how exchanges evaluate decentralization, and what reserve or custody obligations operators must meet.
The stronger trade incentive may ultimately be a combination of these measures rather than reclassification alone. A 20% tax rate would reduce the incentive for Japanese investors to trade through offshore venues, while regulated ETFs would provide access through existing brokerage and financing infrastructure.
Japan’s regulatory shift is already accompanied by stablecoin experiments in the private sector. JCB recently signed an agreement with Circle To test the USDC for cross-border internal treasury transfers and explore stablecoin payments separately at Japanese merchants, expanding the country’s digital asset footprint beyond trade and investment products.
Similar infrastructure is emerging at the international level. BNY has added native mint and redemption capabilities for USDC to its digital asset custody platform, allowing institutional clients to handle transfer, custody and transfers through a single, structured interface. This development shows the type of banking infrastructure that Japanese institutions may increasingly expect as the new framework comes into effect.
Neither result was complete at the parliamentary stage. Final Senate approval would lay the legal foundation; Cabinet Orders, Financial Services Authority Regulations and a separate investment fund amendment will determine how much of Japan’s cryptocurrency market can actually move to the new framework.
