Japan’s 55% Crypto tax era is ending, Will capital follow?

Japan’s Lower House approved a bill on Thursday (June 11) to reclassify cryptos as financial products. This will lead to a cut in the tax rate for capital gains on coins, including Bitcoin and Ether, down from a high of 55% to just 20%, and open doors for crypto ETFs in the fourth-largest economy globally.

With the bill yet to be approved by the Upper House, which would make it a law by 2027, Japan is fast becoming one of the most institution-friendly jurisdictions for digital currencies, especially when compared to other countries trying to lure crypto investors, including the US and South Korea.

What the bill does

This new law changes how cryptocurrency will be regulated by moving its regulation from the country’s Payment and Settlement Law, which viewed cryptocurrencies mainly as payment instruments, to the Financial Instruments and Exchange Act, which regulates stocks and bonds. A tax cut from 30 percent to 20 percent will take place in 2028.

Beyond taxes, the bill introduces an outright ban on crypto insider trading, with penalties comparable to those applied to listed securities. Maximum prison sentences for selling unregistered crypto assets jump from three years to 10, and fines rise from 3 million yen to 10 million yen, according to Nikkei’s reporting on the cabinet decision in April. Token issuers will also face mandatory annual disclosures for the first time.

“We aim to foster more innovation by creating a sound trading environment,” said Masato Yoshizawa. “We’re not necessarily giving crypto a stamp of approval, but we’re aiming for healthy market growth.”

Global markets are watching

The reclassification opens up the possibility for crypto ETFs to be listed on the Tokyo Stock Exchange (TSE) as early as 2027. The operator of the TSE, Japan Exchange Group, has reportedly expressed its desire to list crypto-based ETFs once the law comes into effect.

The measure takes away two factors that may have prevented institutions from entering the Japanese crypto scene in the past – the lack of clear regulation and the high tax rate associated with cryptocurrency transactions in Japan. Major financial firms, like Nomura Holdings and SBI Holdings, plan to create crypto-related exchange-traded products under the new rules.

The timing matters. Donald Trump’s pro-crypto policy stance in the US has accelerated institutional demand globally, and Japan’s move adds another major economy to the list of jurisdictions competing for crypto capital flows. Three of Japan’s megabanks launched a joint stablecoin project in November with FSA backing, and the country approved its first yen-backed stablecoin, JPYC, in 2025, with more than 3.8 billion yen (roughly $25 million) reportedly issued so far.

“Would it be better if taxes were zero? Yes, but at least things are clear,” said Koichi Kano, Japan head at Singapore-based crypto market maker QCP Group and a former FX head at Citigroup. “Until now, crypto was like football. It was interpreted differently by different people. Now, we all know that we’re playing American football, and we all need a helmet.”

Japanese crypto exchanges to face shakeup

Tighter requirements will probably reduce the number of Japan’s 27 registered crypto exchanges, such as Binance Japan, Coincheck, and BitFlyer. According to Shohei Matsumoto, executive officer of Pacific Meta, a consulting firm based in Tokyo, about 50% of Japanese exchanges will be forced to shut down due to stricter regulatory compliance.

New rules might also affect businesses like Metaplanet, holding more than 40,000 Bitcoins and acting as a substitute for cryptocurrency holdings by Japanese stock investors. Once ETFs are launched, their treasury stocks will face competition from ETFs on equal footing, according to QCP’s Kano.

Stablecoins will not be included in the new regulatory system. Stablecoins will continue to be regulated as payment services within the legal framework.

What comes next

The bill is now on its way to the country’s Upper House, the House of Councillors, where it should pass with little trouble. The regulations will go into effect in 2027, while the 20% tax rate will begin in 2028. According to Finance Minister Satsuki Katayama, the move was one “to expand the supply of growth capital” with an eye on “market fairness, transparency, and investor protections.”

On the international stage, Japan’s decision adds a G7 economy with deep institutional capital to the short list of countries where regulated crypto products can trade under clear rules. Whether that draws meaningful capital flows will depend on execution, but the signal is unambiguous.

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