Key points of Japan's cryptocurrency tax reform: Bitcoin classified as a financial product, tax rate reduced from 55% to 20%

In November 2025, the Financial Services Agency (FSA) of Japan officially plans to reclassify Bitcoin, Ethereum, and 105 other cryptocurrency assets as financial products, subject to regulation under the Financial Instruments and Exchange Act, with the Capital Gains Tax being reduced from the current maximum rate of 55% for “miscellaneous income” to the same 20% rate as stock trading.

This historic tax reform is expected to be implemented during the budget review in early 2026, while the FSA will introduce a ban on insider trading in encryption, regulating the trading behavior of issuers and related parties of exchanges. The “green list” system of the Japan Virtual Currency Exchange Association (JVCEA) provides a framework for this transformation, and listed companies like Metaplanet are expected to lead the wave of corporate allocation.

Details of Tax Reform and Market Impact

Japan's current tax system classifies cryptocurrency gains as “miscellaneous income,” subject to a maximum tax rate of 55%, which significantly suppresses the willingness of individuals and businesses to participate. According to the proposal submitted by the FSA to the government, after reclassification, Bitcoin and 104 other crypto assets will be subject to a unified Capital Gains Tax of 20%, on par with traditional financial products such as stocks and investment funds. This change is expected to reduce the tax burden for ordinary investors by over 60%, greatly enhancing the attractiveness of crypto assets.

According to sources from the FSA cited by Asahi Shimbun, the selection of these 105 tokens is based on strict criteria: project transparency, the financial stability and reputation of the issuer, the robustness of the underlying technology, and price volatility risk. In addition to Bitcoin and Ethereum, the list also includes mainstream tokens such as MATIC, XRP, and LTC, covering over 90% of trading volume in Japan. Tokens that are not selected will still be subject to the old tax system, which may accelerate the market's concentration towards mainstream assets.

Japan's encryption tax reform core content

Current tax rate: 55% (highest bracket for miscellaneous income)

New tax rate: 20% (Capital Gains Tax uniform rate)

Covered assets: 105 types of encryption assets (including BTC, ETH, etc.)

Regulatory Framework: “Financial Products Trading Act”

Implementation time: Expected in early 2026

Insider Trading: New Ban on Insider Trading in the Cryptocurrency Market

Green List: JVCEA currently has 30 tokens approved.

Improvement of Regulatory Framework and Prevention of Insider Trading

The FSA's reform not only focuses on tax burdens but also aims to establish comprehensive market regulations. According to the disclosed content, institutions will seek to prohibit individuals and companies “associated with issuers or exchanges” from trading tokens “when in possession of important facts,” which include undisclosed listing dates or financial security information of the issuer. This regulation directly targets the long-standing issue of insider trading in the cryptocurrency market.

From an international comparison perspective, Japan's approach lies between that of the United States and China. The United States regulates the encryption market through judicial interpretations of securities law, while China has imposed a complete ban on cryptocurrency trading. Japan, on the other hand, has opted for a dedicated legislative path. This approach provides regulatory clarity while retaining space for industry innovation, and it may serve as a reference model for other Asian economies.

The self-regulatory system of JVCEA will complement the new regulations of the FSA. The association's “green list” currently includes 30 tokens, which must meet three conditions to be selected: listed on at least three JVCEA member exchanges, listed for at least six months, and recognized by the association as “appropriate” and allowed for unconditional listing by members. This tiered management provides additional protection for investors.

Business Configuration Opportunities and Strategic Adjustments

The tax reform is expected to significantly change the asset allocation logic of Japanese companies regarding encryption. Currently, Japanese listed companies are far behind their American counterparts in terms of encryption allocation, with the main obstacle being the high tax burden. Mitsubishi UFJ Financial Group estimates that lowering the tax rate to 20% could encourage Japanese companies to allocate $15 billion worth of encryption assets over the next three years.

Metaplanet and other pioneers have demonstrated the potential of corporate Bitcoin strategies. By using Bitcoin as a reserve asset, these companies not only hedge against inflation but also achieve significant stock price increases. With lower tax burdens, more companies may follow this model, especially technology firms and exporters with large cash reserves.

From an accounting perspective, Japanese companies are prepared. The Japanese Accounting Standards Board has already followed the US FASB standards as early as 2024, allowing the reporting of cryptocurrency holdings at fair value, with unrealized gains directly accounted for in equity rather than the income statement. This treatment reduces the volatility of earnings, making companies more willing to hold volatile crypto assets.

Market Structure and Liquidity Impact

Tax reform may profoundly change the structure of Japan's encryption market. The proportion of individual investors is expected to rise from the current 35% to over 50%, which is comparable to the level in the U.S. market. At the same time, increased institutional participation may reduce market volatility, especially for mainstream assets such as Bitcoin and Ethereum.

From the distribution of trading volume, Japan may regain its position as the leader in Asian encryption trading. After the ban implemented by China in 2018, Japan was the largest encryption market in Asia, but was subsequently surpassed by South Korea and Singapore. Tax reform combined with Japan's traditional retail trading culture may drive a trading volume increase of 100-150%.

The landscape of exchanges will also be reshaped. Currently, Japan has 23 licensed exchanges, including VC Trade of SBI Holdings, Coincheck of the Monex Group, and the fintech giant bitFlyer. These platforms have established strict compliance systems capable of adapting to new regulatory requirements, while overseas exchanges may re-enter the Japanese market through partnerships.

Outlook on International Competition and Capital Flows

Japan's tax reforms come at a critical moment when global encryption regulations are converging. The EU has implemented the MiCA regulation, Hong Kong has issued VASP licenses, and the US has established a stablecoin framework through the GENIUS Act. Japan's choice reinforces the trend of incorporating crypto assets into traditional financial regulations, which may encourage neighboring economies like South Korea and Taiwan to follow suit with similar reforms.

From the perspective of capital flow, the tax reform may attract overseas encryption projects to seek listing in Japan. Currently, the JVCEA's green list only includes 30 types of tokens, while there are over 500 types on major exchanges worldwide, providing opportunities for compliant international projects. At the same time, Japanese investors may increase their investments in overseas encryption projects, taking advantage of the high efficiency of the new tax system.

Corporate merger and acquisition activities may become active. Traditional Japanese companies, such as the game company GREE and the internet giant GMO Internet, have accumulated rich blockchain experience, and they may acquire or invest in overseas crypto projects to quickly gain technology and market share. This cross-border integration could give rise to new industry giants.

Investment Strategies and Risk Considerations

For Japanese investors, the tax reform creates new allocation opportunities. Individuals may consider increasing their cryptocurrency allocation to 5-10% of their portfolio, focusing on tokens within the green list, which enjoy tax benefits and have high compliance. Long-term holding strategies particularly benefit, as the Capital Gains Tax is only levied upon realization.

Institutional investors need to develop a systematic allocation plan. It is recommended to start with 1-2% of the balance sheet size, execute trades through regulated local exchanges, and adopt professional custody solutions. The Metaplanet model serves as a reference: purchasing Bitcoin through equity financing instead of debt financing, maximizing shareholder value while avoiding leverage risk.

Risk management is indispensable. Despite improvements in the regulatory environment, the inherent volatility of the encryption market still exists. It is recommended to set strict position limits, adopt a regular investment strategy to smooth out costs, and avoid chasing short-term speculative trends. Tax consultation is equally important to ensure full compliance with the new reporting requirements.

Industry Outlook Forecast

Japan's cryptocurrency tax reform marks an important leap in the maturity of the industry. From recognizing cryptocurrency as a legal means of payment in 2017, to establishing an industry self-regulatory organization in 2020, to approving Bitcoin ETFs in 2024 and the current comprehensive tax reform, Japan has demonstrated a prudent and continuous path of cryptocurrency acceptance.

From a broader perspective, this reform represents an acceleration in the integration of traditional finance and the encryption ecosystem. When Bitcoin is classified as a financial product, and when encryption transactions are subject to the same tax system and regulations as traditional markets, the gap between the two worlds is narrowing. This integration brings both opportunities and challenges, particularly in how to maintain the innovative characteristics of encryption technology without being assimilated by traditional systems.

For the global market, Japan's choices may become an important reference. As the world's third-largest economy, Japan's regulatory decisions often influence its Asian neighbors and even attract the attention of Europe and the United States. If tax reforms successfully promote innovation without compromising financial stability, they may provide a template for other hesitant economies.

End of Reform

As the 55% tax burden becomes history and Bitcoin takes the formal stage of financial products, Japan is writing a new chapter in cryptocurrency regulation. This transformation is not just a change in numbers, but a revolution in thinking—from viewing crypto assets as marginal speculative items to recognizing their status as a legitimate asset class. In today's retreat from globalization, Japan's open attitude may hint at another possibility: embracing innovation within regulations and seeking breakthroughs under oversight is the wisdom of mature economies.