Japan could soon join the list of one of the most crypto-friendly nations across the world following the approval of a bill by the Lower House that treats cryptocurrencies like any other conventional financial asset.
If the legislation gains approval through the Upper House, cryptocurrencies such as Bitcoin, Ethereum, and XRP would be treated legally similar to stocks and securities.
Among many things that are likely to change due to the restructuring includes crypto taxation. The bill is expected to slash crypto taxes from 55 percent to 20 percent, making it easier for the launch of crypto ETFs.
This comes at a time when there are significant changes within Japan’s crypto diaspora. About 5.1 million people own cryptocurrency in Japan representing 4.16 percent of the country’s population. With over 12 million active cryptocurrency accounts, the crypto industry has made a big comeback in 2026 due to tax rate cuts.
Japan wants to treat crypto more like stocks than payment tools
Until now, digital assets have largely been regulated as payment methods. In the proposed regulations, crypto assets will now be considered financial products and will be regarded as closer to typical securities such as stocks and bonds.
It may seem like an ordinary regulation update; however, it can have substantial influence on crypto’s position in the financial environment of the country.
There will be clearer policies regarding crypto, and thus, it will be easier to introduce and trade crypto assets to clients through banks and brokerages.
It can also be taken as a sign from the government that crypto currency is considered by the government to be a significant component of modern finance and not just another way of payments.
However, the new regulations will imply more control over the industry as well. For example, there will be restrictions on the usage of insider information about crypto currency for trading.
As it happens in stock exchanges, any person who trades with the help of private knowledge about cryptocurrency can get penalized for doing so.
Crypto enterprises will also be expected to provide annual statements in order to increase transparency levels.
At the same time, regulators are looking to crack down harder on illegal activity. Under the proposal, the maximum prison sentence for running an unlicensed crypto exchange would jump from three years to ten years, reflecting a tougher stance on bad actors while trying to build confidence in the industry.
Biggest victory is tax reform
For many investors, the biggest part of the package has nothing to do with regulation but rather with the taxes.
Japan’s current crypto tax system has long been criticized for being one of the toughest among developed economies. Depending on income, gains from cryptocurrency investments can be taxed at rates as high as 55 percent, making active trading and long-term investing significantly less attractive than other financial assets.
The proposed changes would replace that structure with a flat capital gains tax of around 20 percent, putting crypto much closer to stocks and traditional investments.
That could make a noticeable difference for both retail and institutional investors. Lower taxes often encourage greater participation, and many in the industry believe the change could help keep investment activity within Japan rather than pushing it to overseas markets with friendlier rules.
The proposed bill might allow another development that the crypto scene in Japan has been looking forward to for a long time – the regulation of crypto exchange-traded funds.
With the new law making digital currencies legal financial instruments, Japan will have a legal basis on which to launch crypto ETFs and thus let the investors have access to such cryptocurrencies as Bitcoin without actually buying them.
According to industry forecasts, the first crypto ETFs might appear in the near future – perhaps even next year.
