Japan proposes crypto ETFs and tax cuts: Could this unlock $34B in assets?
Japan's FSA noted that there were more than 12 million domestic crypto accounts as of January 2025, holding assets worth $34 billion.
- Reclassifying crypto from a digital payment method to a financial product could increase investor confidence and drive adoption.
- The FSA also proposed reducing crypto capital gains tax to a flat 20%, down from current rates that reach as high as 55%.
Japan’s Financial Services Agency (FSA) has proposed reclassifying cryptocurrencies as financial products instead of digital payment methods.
If approved, this shift, under the Financial Instruments and Exchange Act (FIEA), would bring crypto under the same regulatory framework as traditional securities.
As part of the reforms, the FSA also recommends lowering the tax rate on crypto gains to a flat 20%, down from the current maximum of 55%.
This move aims to make crypto investing more accessible for both retail and institutional investors.
The reclassification could also open the door to launching crypto exchange-traded funds (ETFs) in Japan, signaling the country’s growing openness to digital assets.
Data shows crypto ownership exceeds participation in FX, bond holders
While Japan has taken progressive steps in crypto regulation, it’s also known for strict licensing and compliance standards. Notably, Japan’s FSA stated that there were more than 12 million domestic crypto accounts as of January 2025.
These accounts hold assets worth more than 5 trillion Japanese yen, or $34 billion. This was more than the participation seen in traditional financial products such as foreign exchange and corporate bonds.
The increased crypto ownership was even more prominent among tech-savvy investors and highlighted the growing interest in cryptocurrencies as a legitimate investment asset.
Globally, institutional involvement is also rising. As of 2025, more than 1,200 institutions, including U.S. pension funds, hold U.S.-listed Bitcoin[BTC] spot ETFs, according to the report.
The proposed FSA reforms, set for discussion at the June 25 Financial System Council meeting, would reclassify crypto from a digital payment method (under the current Payment Services Act) to financial products under the Financial Instruments and Exchange Act.
This shift would introduce enhanced investor protections, clearer regulations, and could pave the way for crypto exchange-traded funds (ETFs) in Japan.
Meanwhile, major financial institutions are moving to capitalize on the stablecoin opportunity.
In April, Sumitomo Mitsui Financial Group (SMBC), TIS Inc., Ava Labs (Avalanche), and Fireblocks signed a memorandum to support the launch of stablecoins pegged to both the Japanese yen and the U.S. dollar.
This initiative complements the FSA’s proposed reclassification of cryptocurrencies as financial products, signaling a broader national strategy to integrate digital assets into the traditional financial system.
