Japan’s parliament has passed 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 come into effect within a year of publication. Details will be determined by cabinet orders and supervisory guidelines.
Previously, the primary legal framework viewed digital assets mainly as a means of payment. The new law categorizes them as a distinct class of financial instruments, separate from securities. Stablecoins will continue to be considered electronic payment instruments.
Trading
The amendments introduce a specific ban on trading using significant non-public information. This will apply to assets traded on crypto platforms registered in Japan.
Insiders may include employees of issuers, trading platforms, and other market participants with access to information about listings, trading suspensions, project changes, and major deals.
Companies issuing cryptocurrencies will be required to provide data before issuance, disclose information on significant events, and release annual reports. For assets without a specific issuer, including Bitcoin, registered trading platforms will handle information disclosure.
The law also increases penalties for operating without registration. The maximum prison term will rise from three to ten years, and the upper limit of fines will increase from 3 million yen ($18,500) to 10 million yen ($61,600).
Taxes
Tax changes are part of a separate reform and are not directly included in the adopted amendments. The proposed model suggests separate taxation at a rate of 20.315% and the ability to carry forward losses for three years.
The new regime is planned to apply only to certain crypto assets traded through registered operators in Japan. The final list of coins and the procedure for accounting operations will be approved separately by the authorities.
Income from staking, lending, and operations with NFTs is expected to continue being taxed as other income under the current progressive scale. The tax changes are planned to be implemented from 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, Japan Exchange Group is considering the first listings of crypto ETFs as early as 2027. Potential issuers could include traditional financial institutions.
However, the adoption of the amendments does not mean automatic approval of funds based on Bitcoin or other cryptocurrencies. Additional regulations, decisions by regulators, and listing rules will be required for their launch.
Earlier, in March, the Bank of Japan began experiments with blockchain technology for its integration into the financial infrastructure. As part of the project, a test sandbox was launched where the regulator is testing settlements in the form of deposits in current accounts using distributed ledgers.
