Japan's Financial Services Agency (FSA) has reportedly finalized a comprehensive plan to reclassify 105 cryptocurrencies, including Bitcoin, as financial products under the Financial Instruments and Exchange Act. This move represents one of Japan’s most significant regulatory shifts in the digital asset space since the Mt. Gox era, aiming to bring digital assets closer to traditional financial instruments in terms of oversight.

Under the proposed framework, these 105 crypto assets would be subjected to the same rigorous disclosure, reporting, and market surveillance standards currently applied in Japan's traditional securities markets. This means that exchanges listing these assets would be mandated to publish detailed information for each token, encompassing critical data such as whether it has an identifiable issuer, its underlying blockchain architecture, and its historical price volatility to ensure market transparency.

Furthermore, for the first time, the FSA plans to introduce explicit insider trading rules specifically for the cryptocurrency sector. This groundbreaking regulation would strictly prohibit issuers, exchange executives, and other related parties from engaging in token trading using non-public information. This category of privileged information would include, but not be limited to, planned listings or delistings, impending bankruptcies, or any other material events that could significantly impact token prices. These crucial amendments are anticipated to be officially submitted during the 2026 ordinary Diet session.

Alongside the reclassification efforts, the FSA is also vigorously advocating for a substantial reduction in the country’s notoriously high crypto tax rate. Currently, Japanese residents are required to declare profits derived from cryptocurrency trading as “miscellaneous income,” which can result in an effective tax burden as high as 55% for high-earning traders.

The agency's proposal seeks to align crypto taxation with that of equities, introducing a flat 20% rate for profits generated from these newly recognized financial products. This proposed lower rate would not only benefit individual traders but also extend to corporations, including banks and insurance companies that engage in crypto sales through their securities subsidiaries. This tax proposal is slated for review during the next fiscal year’s tax reform cycle and could potentially take effect as early as 2026.

This sweeping regulatory shift underscores Japan’s accelerating Web3 ambitions. The FSA has recently re-evaluated and revised existing rules that previously restricted banks from holding volatile assets like Bitcoin, thereby paving the way for financial institutions to treat digital assets more akin to conventional stocks or government bonds. The agency is also considering further measures, such as allowing banks to operate their own crypto exchanges and provide custody services for digital assets.

These developments align with the rapid growth in domestic crypto adoption within Japan, with over 12 million crypto accounts registered as of early 2025. Concurrently, there is a strong push to establish a robust and regulated yen-stablecoin ecosystem. Major financial players like Mitsubishi UFJ Financial Group (MUFG), Sumitomo Mitsui Banking Corp. (SMBC), and Mizuho Bank are already collaborating on initiatives to issue yen-pegged tokens.

Further demonstrating this trend, Japan’s first locally regulated stablecoin, JPYC, successfully launched on October 27. The interest from major Japanese banks in expanding their crypto services is evident, with MUFG, SMBC, and Mizuho Bank having collaborated on issuing stablecoins pegged to both the Japanese yen and the U.S. dollar, showcasing a diversified approach to digital currencies.

A prime example of the country’s burgeoning crypto market is Metaplanet. This company has strategically acquired and holds Bitcoin as a treasury reserve while simultaneously launching Bitcoin-backed financial products designed to generate income within Japan’s traditionally low-yield market. Metaplanet raises capital through a combination of equity and preferred shares, mirroring strategies employed by other firms, to fund its significant Bitcoin purchases.