Japan's Financial Services Agency (FSA) is reportedly preparing its most comprehensive regulatory overhaul yet, aimed at revitalizing the country's crypto sector. The proposed reforms, expected to be submitted to the Diet in 2026, center on two major changes:
1. Comprehensive Tax Relief and Investment Parity
- Tax Rate Reduction: The maximum tax rate on crypto gains is set to be dramatically reduced from a steep progressive rate that peaks at 55% (miscellaneous income) to a flat 20% capital gains tax, aligning it with the tax policy for stocks and derivatives.
- Loss Carry-Forward: Investors will gain the ability to deduct crypto losses from future gains over a period, mirroring the three-year loss carry-forward rule available to stock investors.
- Goal: This overhaul seeks to resolve investor complaints about high taxes, which have historically driven capital and traders offshore, thereby bolstering domestic investment.
2. Reclassification and Stricter Market Oversight
- Digital Asset Reclassification: 105 designated cryptocurrencies, including Bitcoin and Ethereum, will be reclassified as "financial products" under the Financial Instruments and Exchange Act (FIEA).
- Mandatory Disclosure: This FIEA reclassification imposes new rules on crypto issuers, requiring them to disclose detailed information on volatility, blockchain technology, and operational risks, providing greater transparency for retail investors.
- Insider Trading Bans: For the first time, these 105 designated assets will be subject to insider trading rules, applying traditional securities market standards to the digital asset space.
- Infrastructure Oversight: Following the DMM Bitcoin hack, key third-party infrastructure vendors (custody, wallet management) must now register and submit to FSA oversight, expanding protection across the entire crypto ecosystem.
- Institutional Integration: While banks and insurance firms are barred from selling crypto directly to consumers, the FSA is considering allowing their securities subsidiaries to distribute crypto and potentially enabling banking groups to obtain crypto exchange licenses.
If passed, the reforms are expected to take effect in late 2026 or early 2027, positioning Japan as a potential global model for balanced crypto regulation that fosters innovation while maintaining robust consumer protection.
November 2025, Cryptoniteuae