Japan's Lower House Passes Bill Moving Crypto Under Securities Law, Opening Path to ETFs and 20% Tax Rate

Japan's lower house passed a bill on Thursday that reclassifies cryptocurrencies as financial instruments under the country's securities framework, clearing a path to regulated spot ETFs and a flat 20% capital-gains tax.

The legislation amends the Financial Instruments and Exchange Act (FIEA), shifting crypto out of the Payment Services Act and into the same legal framework that governs stocks, bonds, and investment trusts, according to Bloomberg. The bill heads next to the upper house, where passage is widely expected. One key caveat: the reform is not yet law.

The Structural Shift

Japan's current crypto framework treats digital assets as payment instruments, which means they sit under a lighter disclosure and protection regime than traditional securities. Under the FIEA, crypto issuers would face the same disclosure obligations, custody standards, and insider-trading rules that apply to listed equities.

Representatives of the Tokyo Stock Exchange indicated that crypto ETFs could begin listing as early as 2027 once the framework is finalized. Japan's major securities houses are already positioning: SBI Securities and Rakuten Securities have said they plan to offer crypto investment trusts once regulators finalize rules, with 11 additional firms including Nomura, Daiwa, and Mizuho indicating they would consider entering the market.

“We aim to foster more innovation by creating a sound trading environment,” Masato Yoshizawa, a representative from Japan's Financial Services Agency, told Bloomberg.

Koichi Kano, Japan head at Singapore-based crypto market maker QCP Group, told Bloomberg the legislation provides “long-awaited clarity for market participants.”

Tax and Disclosure Changes

Under Japan's 2026 Tax Reform Outline, crypto gains would be taxed at a flat 20%, replacing a progressive miscellaneous-income rate that can reach 55%. That tax change is expected to take effect in 2028. Matching the rate applied to equities and bonds closes a long-standing competitive gap that institutional managers have cited as a structural barrier to Japan's crypto market.

Exchanges would face expanded disclosure requirements covering 105 tokens currently approved for domestic trading. Penalties for operating an unregistered crypto business would increase: the maximum prison sentence for unregistered sellers would rise from three years to 10 years.

Insider-Trading Rules

The bill extends insider-trading enforcement to crypto for the first time. Individuals or entities with access to material non-public information, including issuers, exchange operators, and anyone aware of pending listings, delistings, or major technical incidents, would face the same restrictions applied to listed equities.

Hinza Asif, president of the Asia Web3 Alliance, told Bloomberg that stronger enforcement measures “could help create a more trusted environment for participants entering the market.”

During FSA working-group meetings, some industry representatives warned that the regulatory burden may be excessive, noting that roughly 90% of domestic exchanges are operating at a loss. Some committee members described the proposals as “too heavy-handed” and urged the FSA to strike a balance between investor protection and market viability.

Stablecoins Carved Out

Stablecoins are excluded from the FIEA reclassification and remain regulated under the Payment Services Act as electronic payment instruments. The carve-out aligns with how Japan has separately developed its stablecoin infrastructure: earlier this week, MUFG, SMBC, and Mizuho announced plans for joint stablecoin transactions targeting live deployment during fiscal 2026.

What Comes Next

Implementation is targeted within roughly one year of the bill becoming law, pointing to fiscal year 2027 for the new FIEA regime to take effect. The 20% tax rate follows separately under the 2026 Tax Reform Outline and would activate in 2028.

When Japan's cabinet approved the measure in April, Finance Minister Satsuki Katayama framed it as expanding the supply of growth capital while ensuring market fairness, transparency, and investor protection. The upper house has not yet scheduled a vote.