- Japan reclassifies crypto as a financial product under tougher securities oversight.
- New rules introduce insider trading bans, annual disclosures, and stricter penalties.
- The reform lays the groundwork for crypto ETFs and a separate tax rate near 20%.
Japan’s upper house approved legislation on July 15 that moves cryptocurrency trading oversight from payment law into the securities regulatory framework. The measure amends the Financial Instruments and Exchange Act and the Payment Services Act, following Cabinet approval on April 10 and passage through the lower house.
Crypto Trading Moves Under Securities Law
The Crypto Bill reclassifies digital assets as financial products rather than payment tools, marking a major legal shift for Japan’s cryptocurrency market. As part of this transition, crypto asset exchange operators will be renamed crypto asset trading operators.
They will also face significantly tougher penalties for operating without registration. Accordingly, the maximum prison term will increase from three years to ten years, while the highest fine will rise from 3 million yen to 10 million yen.
In addition, the legislation introduces insider trading rules for crypto markets. These provisions target transactions based on undisclosed information involving new issuer ventures, listings, or delistings.
To support enforcement, the Securities and Exchange Surveillance Commission will receive the authority to investigate suspected violations. Meanwhile, administrative penalties will provide another mechanism for addressing misconduct.
Issuers of specified crypto assets must also publish annual disclosures, thereby strengthening market transparency and investor protection.
ETF Access and 20% Tax Reform Move Closer
Alongside stronger market oversight, the tax plan would replace comprehensive taxation, which can reach 55%, with separate taxation of roughly 20% on cryptocurrency transactions. It would also allow investors to carry losses forward for three years and would apply to assets listed on domestic exchanges.
However, the tax changes depend on the enforcement of the revised securities law. Therefore, if implementation begins in fiscal 2027, the new tax system could take effect on January 1, 2028.
The Crypto Bill also establishes a legal foundation for cryptocurrency ETFs. Nevertheless, ETF approvals and listing decisions will remain subject to separate regulatory reviews.
Meanwhile, the Japan Exchange Group is reportedly considering possible listings around 2027. The new framework could also allow trust companies, securities firms, banks, and insurers to participate more directly in the market.
Before enforcement begins, regulators will draft detailed government ordinances and supervisory guidelines. These rules will address reserve requirements, leverage limits for derivatives, custody standards, and anti-money laundering obligations.
Although smaller exchanges may face higher compliance costs, domestic financial institutions could gain broader market-entry opportunities. As a result, Japan is moving toward securities-style supervision, stronger enforcement, wider disclosure, and a clearer route to ETFs and tax reform.
Related: Japan’s SBI Deepens Solana Ties in Push for Institutional On-Chain Finance
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