Japan's Cabinet has approved a significant shift, amending the Financial Instruments and Exchange Act to classify cryptocurrencies as financial instruments. Previously regulated under the Payment Services Act, this change aligns crypto with traditional assets like stocks and bonds, acknowledging their growing importance as investment vehicles.
The reform aims to modernize Japan's financial regulatory framework, enhance market transparency, and improve investor protection. Key provisions include new oversight standards and disclosure requirements.
The bill also introduces prohibitions against insider trading and mandates annual disclosures for issuers. Stricter enforcement, including increased penalties for unregistered operators, is also part of the package.
If enacted this Diet session, these reforms are slated to take effect in fiscal 2027. This move comes as Japan seeks to reclaim capital that has flowed to crypto-friendly jurisdictions like Singapore and Dubai, partly due to more favorable tax treatments.
In a related tax reform, Japan plans to replace its high progressive crypto tax rate, which reached 55%, with a flat 20% rate under self-assessment. This aims to make the country more competitive in the global digital asset market.