Asian shares slipped as weakness in US tech stocks and a stronger dollar weighed on sentiment, leaving traders cautious ahead of this week’s economic data.
Japan is preparing a sweeping overhaul of its cryptocurrency framework after reports that the Financial Services Agency (FSA) plans to slash tax rates, tighten regulation and reclassify digital assets. The proposed package, expected in the next parliament session, could reshape how local investors and exchanges engage with crypto.
From 55% to 20%: Tax Relief That Could Fuel Traders
Currently, profits from crypto trading in Japan fall under “miscellaneous income”, meaning some traders pay tax rates as high as 55 %. Under the proposed reforms, gains on around 105 crypto-assets, including Bitcoin (BTC) and Ethereum (ETH), could be taxed at a flat rate of 20 %, aligning them with share trading rules. This shift could revitalise Japan’s digital-asset market by reducing the tax burden and making crypto more accessible to traders.
A Legal Makeover: Crypto Becomes Financial Products
In parallel with the tax reform, the FSA is planning to reclassify selected cryptocurrencies as “financial products” under the Financial Instruments and Exchange Act (FIEA).
This reclassification would subject these assets to stricter oversight, including disclosure requirements, issuer identification and possibly insider-trading rules. For the first time, crypto holdings could be treated much like stocks or bonds in the eyes of Japanese financial regulators.
Banks, Exchanges and Risk Management Set to Shift
If the reforms pass, Japanese banks and insurance companies may gain clearer footing to offer crypto-services via their securities-arms, a move that could enhance the institutional ecosystem. Exchanges and crypto-platforms will face significant compliance demands: detailed information about each token’s issuer, blockchain technology, risk factors and volatility profile will need to be disclosed. Until now, such standards were uncommon in Japan’s crypto ecosystem.
What It Means for Traders and Investors
From a trader’s perspective, these changes bring major implications. With a 20 % flat tax rate, higher net returns become more plausible, particularly for active traders. The alignment with equity-style regulation may also attract institutional capital and improve liquidity.
However, the enhanced regulatory environment may increase compliance costs and reduce the number of tokens available for trading if they do not meet the new criteria. Traders will need to stay alert to which 105 assets make the approved list, as non-included tokens may remain under older, less favourable tax and regulatory regimes.
Why It Matters Now
Japan’s move signals a broader trend; major economies are reconsidering how cryptocurrencies fit into traditional finance. Its plan to introduce the reforms in 2026 places it among the front-runners for regulated digital-asset markets in Asia.
For global traders, this is a potential shift in how crypto-markets operate across Asia. Regulators in neighbouring regions are likely to watch closely, ensuring they stay competitive whilst also balancing investor protection.
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