Japan’s parliament has passed legislation reclassifying digital assets as financial instruments under the Financial Instruments and Exchange Act, placing cryptocurrency on the same regulatory footing as traditional securities like stocks and bonds.
The bill cleared the lower house of parliament in mid-June, following cabinet approval on 10 April 2026.
Full enactment is expected in 2027 after upper house review.
The move elevates digital currencies from their previous status as payment tools to regulated investment products on par with stocks and bonds.
The bill reclassifies nearly 105 crypto assets and introduces bans on insider trading, requires issuers to publish annual disclosures, and imposes stricter penalties.
Investor protection measures include increasing the prison sentence from three years to up to 10 years and raising fines from 3 million yen to up to 10 million yen.
The regulatory shift opens the door to crypto exchange-traded funds in Japan.
Major financial groups including SBI Holdings and Nomura Holdings are among the first companies to develop crypto-linked exchange-traded products.
Finance Minister Satsuki Katayama had emphasised the reforms will expand growth capital supply whilst ensuring market fairness and investor protection.
Accompanying the regulatory overhaul, crypto gains currently taxed as miscellaneous income at progressive rates reaching 55 per cent would be replaced with a separate flat rate of 20 per cent.
The tax change is slated for 2028 for individual traders, subject to final passage.
The country’s over 12 million verified crypto users and $34 billion in assets under local custody now have a real runway to grow with these institutional-grade rules in place.
Japan became the first major economy to regulate crypto exchanges following the 2014 Mt Gox collapse. The new framework represents the most significant overhaul of Japan’s crypto regulatory framework since the country first brought exchanges under the Payment Services Act.
The reclassification paves the way for crypto exchange-traded funds in Japan, with the regulatory pathway for a yen-denominated Bitcoin ETF becoming dramatically cleaner.
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