Japan’s Crypto Revolution: New Asset Categories & Tax Cuts Poised to Boost Market

Tokyo shakes up crypto regulation with investor-friendly reforms.

Breaking down the changes: Lower taxes for hodlers, clearer rules for exchanges.

Will this finally push institutional adoption—or just create more paperwork?

Regulators promise 'balanced approach' (translation: we'll take your money either way).

Possible end to the current tax model

Japan’s existing taxation system for crypto is one of the strictest among major economies. Profits made from crypto trading must be reported as “miscellaneous income,” a category that can place some earners in the top tax bracket at 55%.

The FSA is considering replacing this system for the selected 105 coins. Under the proposed change, gains would be taxed at a flat 20%, the same rate used for stock investments. This would align Japan’s approach more closely with other countries and ease the tax burden on active traders.

The tax reduction will also act as a massive incentive for high-income investors to shift capital in the crypto sector. Moreover, it could also motivate Japanese Web3 developers and innovators to focus on the nation’s development, rather than moving to crypto-friendly jurisdictions like Singapore and Dubai.

The proposal is expected to be submitted for consideration ahead of the government’s 2026 budget discussions. The FSA has not publicly confirmed or denied the details of the report.

How the eligible coins may be selected

Asahi reports that the FSA used several filters to decide which tokens might be included. These reportedly range from how transparent a project’s operations are, to the financial health of its issuer, to the stability and reliability of the technology behind the coin.

Price volatility and whether a token could pose risks to investors also appear to be part of the evaluation.

The Japan VIRTUAL Currency Exchange Association (JVCEA), a self-regulating industry body, maintains its own “green list” of coins that it considers especially safe and transparent.

This list currently includes 30 cryptocurrencies such as Bitcoin, Ethereum, XRP, MATIC, and Litecoin. To qualify, a token must be widely listed across domestic exchanges and must have maintained a stable presence for at least six months.

Insider trading rules also under review

In parallel with the tax and classification changes, the FSA is reportedly preparing rules to address insider trading in the domestic crypto sector.

These rules would restrict individuals or companies connected to token issuers or exchanges from trading assets while in possession of non-public information, such as unannounced listings or financial concerns involving a project. 

The objective is to bring crypto-related conduct closer to standards that already apply in traditional financial markets, where trading based on undisclosed information is prohibited. 

The FSA’s recent regulatory initiatives signal Japan’s efforts to formalize crypto oversight while also making its market more competitive with the overall global market. If implemented, the new changes would represent one of the most significant reforms in Japan’s crypto regulatory framework so far. 

Also Read: Japan Eyes Tighter Rules for Bitcoin-Holding Firms