Japan’s FSA Plans to Treat Crypto as Securities, Paving the Way for ETF Approvals and Tax Cuts

Highlights:

• Japan’s FSA reviews virtual assets as financial products to enhance investor protection.
• Potential changes include allowing Bitcoin ETFs and lowering crypto tax from 55% to 20%.
• Japan has taken a cautious approach to cryptocurrency compared to other Asian markets.

Japan’s Financial Services Agency (FSA) has begun reviewing the treatment of virtual assets as financial products similar to securities, Nikkei reported on Feb. 10. The move aims to enhance investor protection by requiring companies to disclose more detailed information. Currently, the agency is holding closed-door research meetings with experts to assess whether existing regulations on virtual currencies are sufficient.

Timeline for Regulatory Changes

Based on the study group’s findings, the agency plans to announce regulatory amendment directions by June, per the report. It will then consult the Financial Council, which meets after autumn. After the council’s discussions, the agency aims to submit a law amendment proposal to the regular National Diet session in 2026.

The Japanese Financial Services Agency intends to treat crypto assets as financial products similar to securities, and plans to implement tax cuts and approve Bitcoin spot ETFs. The new system also considers lifting the ban on Bitcoin spot ETFs and may reduce the current tax rate…

— Wu Blockchain (@WuBlockchain) February 10, 2025

Potential Crypto Regulation Changes by Japan’s FSA

Changes may include allowing spot Bitcoin ETFs and lowering the crypto tax from 55% to 20%, which would match the financial income tax rate. Officials are deciding whether the rules should apply to all cryptocurrencies or just U.S.-approved ones like Bitcoin and Ethereum.

In August last year, FSA Commissioner Hideki Ito stated that approving cryptocurrency ETFs in Japan required careful review. In December, Prime Minister Shigeru Ishiba expressed a cautious stance, questioning whether cryptocurrency should be made easier for public investment.

On the other hand, industry participants in the Domestic Cryptocurrency ETF Study Group published recommendations in October last year. They proposed prioritizing major cryptocurrencies like Bitcoin and Ethereum in discussions on establishing cryptocurrency ETFs in Japan.

Japan’s Ongoing Approach to Cryptocurrency Regulations

Japan was among the first nations to introduce comprehensive cryptocurrency regulations. In 2017, the government formally recognized Bitcoin and other digital assets as legal payment methods, establishing strict oversight for cryptocurrency exchanges. Any platform handling digital assets must register with the Financial Services Agency and adhere to regulations designed to safeguard users.

Companies must ensure strong cybersecurity, keep client and corporate funds separate, and undergo regular audits. In 2020, the Payment Services Act introduced new licensing requirements for crypto firms and placed limits on margin trading. Japanese media reports that Finance Minister Katsunobu Kato has committed to finalizing the approval process for the country’s cryptocurrency tax reform by June 2025.

Reinforcing its strict regulatory stance, the FSA has asked Apple and Google to suspend downloads of five unregistered cryptocurrency exchanges. These include Dubai-based Bybit Fintech, Singapore-based MEXC Global, LBank Exchange, Seychelles-based KuCoin, and Singapore-based Bitget.

Although the FSA made its request last week, Apple removed the apps from its App Store on Feb. 6, blocking Japanese users from downloading them, Nikkei reported on Feb. 7. Japan has adopted a more cautious stance on cryptocurrency compared to other Asian markets.