Japan has taken a significant step toward legalizing spot Bitcoin ($BTC) ETFs after its Upper House committee approved a landmark bill that would bring crypto assets under the country's secur
Japan has taken a significant step toward legalizing spot Bitcoin ($BTC) ETFs after its Upper House committee approved a landmark bill that would bring crypto assets under the country's securities framework and sharply reduce the tax burden on investors.
The bill reclassifies cryptocurrencies as financial instruments under the Financial Instruments and Exchange Act (FIEA), marking a meaningful shift in Japan's regulatory framework. Previously, crypto in Japan had been governed since 2017 by the Payment Services Act, a framework built in the aftermath of the Mt. Gox collapse that treated digital assets primarily as payment tools, with a correspondingly light disclosure and protection regime.
The bill moves Bitcoin, Ethereum, XRP and other tokens under the FIEA, the same law that governs stocks, bonds and investment trusts. Along with the reclassification, the bill extends insider-trading enforcement to crypto for the first time, meaning individuals or entities with access to material non-public information, including issuers and exchange operators, would face the same restrictions applied to listed equities. Penalties are also set to rise: the maximum prison sentence for operating an unregistered crypto business would increase from three years to ten years.
Crypto gains are currently taxed as miscellaneous income at progressive rates reaching 55%. The bill would replace that with a separate flat rate of 20% and enable loss carryforwards, both of which align crypto with securities. The two parts of the reform, however, move on separate timelines. The FIEA reclassification is targeted to take effect in fiscal 2027, roughly a year after enactment, while the flat tax follows separately under the 2026 Tax Reform Outline and would activate in 2028. In practice, that means Japan could see institutional product availability first and retail tax relief the year after.
Representatives of the Tokyo Stock Exchange have indicated that crypto ETFs could begin listing as early as 2027 once the framework is finalized.Nomura and SBI are already preparing crypto-integrated investment trusts pending FSA approval, with the reclassification under the Exchange Act being the legal step required before such products can list.
The bill's passage in the Upper House committee follows its earlier approval by the Lower House, and sets the stage for final approval, government promulgation, and subsequent rulemaking by the Financial Services Agency (FSA). Not all in the industry are satisfied with the pace. Koichi Kano, Japan head at market maker QCP Group, said the legislation gives market participants long-awaited clarity, while some committee members called the proposals "too heavy-handed" and SBI's chief executive had earlier criticized the pace as "extremely slow."
Sources:Crypto Briefing: Japan advances bill to legalize Bitcoin ETFs, cut crypto taxesCrypto Times: Japan is one vote from Bitcoin ETFs and a 20% crypto tax capThe Defiant: Japan's Lower House passes bill moving crypto under securities law
