Japan’s FSA to Treat Crypto as Financial Products, Unlock ETFs with 20% Flat Tax

Japan’s Financial Services Agency (FSA) has introduced a proposal to reclassify cryptocurrencies as financial products under the Financial Instruments and Exchange Act (FIEA). This change would bring crypto trading in line with traditional securities and introduce a flat tax rate of 20% on capital gains from digital asset income.

Currently, crypto gains in Japan are taxed at progressive rates up to 55%. The proposed flat tax, similar to that of stocks, aims to ease the burden on investors and encourage broader market participation.

The reclassification under FIEA could also pave the way for the approval of spot Bitcoin exchange-traded funds (ETFs) in Japan. The proposal was released on 24 June and will be deliberated at the Financial System Council’s 25 June session.

Treating crypto as financial products would also open the door for Japan to approve its first Bitcoin ETFs – an investment vehicle already widely adopted internationally. The FSA cited data that shows more than 1,200 financial institutions now hold US-listed spot Bitcoin ETFs.

Related: Czech Republic to Exempt Long-Term Bitcoin Holdings from Capital Gains Tax Starting 2025

Japan’s Expanding Crypto Roadmap

The proposed policy is in line with Japan’s New Capitalism initiative, which encourages investment-led growth and the responsible expansion of Web3 technologies.

As of early 2025, the FSA reported more than 12 million active domestic crypto accounts and assets on platforms surpassing 5 trillion yen (AU$53.1 billion). Crypto ownership has reportedly outpaced other traditional investment products such as foreign exchange and corporate bonds among Japanese retail investors.

The proposal adds to Japan’s broader digital finance push, which includes stablecoin commercialisation and a national digital currency pilot.

Related: Fed Drops ‘Reputational Risk’ Label in Bank Exams, Easing Path for Crypto Firms