Japan Signals Big Shift: FSA Set To Classify Crypto As Financial Products

According to reports, Japan’s Financial Services Agency is preparing a major rewrite of how crypto are treated under the law, moving to classify certain digital assets as “financial products” and placing them under stricter rules and tax treatment.

The change would affect 105 cryptoassets, and it could reshape trading, reporting and who is allowed to hold these assets.

Rules For Assets

The move would force domestic exchanges to publish far more detail about each listed token — for example, whether an asset has a clear issuer, the technology that runs it, and its volatility profile.

Bitcoin and Ether are among the listed names covered. The proposed shift would fold these tokens into the Financial Instruments and Exchange Act, bringing them under the same insider-trading framework that governs stocks and other securities. The regulator is said to plan to present a draft of the law in 2026.

A Flat Tax Proposal That Lowers The Top Rate

Reports have disclosed that the FSA wants gains on the approved tokens taxed at a flat 20%. Today, many crypto profits are treated as “miscellaneous income,” where high earners can face rates as high as 55%.

Moving to a 20% regime would align the treatment of those assets more closely with how stock gains are taxed, and could change the incentives for active traders and investors.

Based on reports, the regulator is also thinking about letting banks hold crypto for investment, which under current practice is effectively blocked because of volatility concerns.

Bank groups could be allowed to register and operate as licensed exchanges through their securities arms, enabling them to offer trading and custody services directly to customers. That would mark a big shift in where custody and trading services could be offered in Japan.

Stricter disclosure demands and insider-trading rules would probably raise costs for exchanges and token issuers. Smaller platforms might drop tokens that are expensive to support under the new rules.

At the same time, the changes would aim to reduce market abuse tied to non-public information, such as upcoming listings or delistings. Enforcement, however, will be tricky; tracing off-exchange trades and private wallets across borders remains difficult.

If the plan moves forward, record keeping will become more important for everyone involved. Traders should keep clean proof of cost basis and timestamps.

Exchanges need to improve token documentation and governance records. Institutions that eye custody services must prepare risk controls, compliance checks and investor disclosures now, because banks that want to enter will face tight scrutiny.

Featured image from PlanetofHotels.com, chart from TradingView