Japan’s FSA proposes classifying cryptocurrencies as financial products

Regulators in Japan want to reclassify the legal status of cryptocurrencies as financial products under the Financial Instruments and Exchange Act. The proposal , introduced by Japan’s Financial Services Agency (FSA) on June 24, is part of a broader push to align the country’s financial system with its “New Capitalism” strategy, which aims to transform Japan into a more investment-driven economy. Under the proposed changes, cryptocurrencies would move from the existing regulatory scope of the Payment Services Act to the more comprehensive Financial Instruments and Exchange Act (FIEA), the same framework that governs securities and traditional financial products. If adopted, this would allow for the launch of crypto exchange-traded funds (ETFs) in Japan and reduce the capital gains tax on crypto from a rate of up to 55% to a flat 20%, putting it in line with taxation on stock investments. Among other provisions are plans to establish a dedicated working group to examine the proposed reclassification and oversee regulatory developments. In the policy document, the FSA has highlighted how crypto adoption in the country has seen a noticeable uptick over the past years. As of January 2025, over 12.1 million domestic crypto accounts were active, and crypto holdings on platforms exceeded 5 trillion yen (approximately $34 billion). The FSA said that crypto ownership has outpaced participation in traditional instruments such as FX trading and corporate bonds, particularly among younger, tech-savvy investors. With this proposal, Japan hopes to catch up with the progress made across leading economies like the United States, where Bitcoin and Ethereum ETF products have seen great success. Citing data from March 2025, the FSA pointed to more than 1,200 financial institutions, including U.S. pension funds and Goldman Sachs, now holding U.S.-listed spot Bitcoin ETFs. Japan advances crypto regulations Before unveiling its June proposal, FSA had already moved to redefine crypto through a draft framework categorising tokens by function and structure. At the time, the FSA proposed classifying tokens based on their economic role and governance model, separating fundraising assets, labeled Type 1, from decentralized, non-fundraising tokens like Bitcoin and Ethereum, now referred to as Type 2. Japanese regulators have warmed up to the crypto sector over the past years, and there have been growing calls within policymaking circles to recognise digital assets as a legitimate component of the financial system. The Bank of Japan, for instance, has warned that in a highly digitized society, trust in fiat currency could erode if central banks fail to ensure price stability. According to Deputy Governor Shinichi Uchida, in such scenarios, cryptocurrencies or stablecoins could eventually fill the gap, posing a credible alternative to sovereign money in the eyes of future generations. Separately, Japan became one of the first countries to approve a stablecoin license under its updated rules. SBI VC Trade, a subsidiary of SBI Holdings, was licensed to handle stablecoins and said it was preparing to support Circle’s USDC. The post Japan’s FSA proposes classifying cryptocurrencies as financial products appeared first on Invezz

Source: Invezz