Tax breaks for cryptocurrencies expected in Japan

Key points:

• Japan plans to reclassify 105 cryptocurrencies and apply financial product regulations to them.
• Profits from trading these coins may be subject to a flat rate of 20% instead of the current 55%.
• The FSA also intends to crack down on insider trading and present reforms at the 2026 budget session.

Japan’s top financial regulator has announced plans to reclassify 105 cryptocurrencies, including BTC and ETH, as financial products. According to Asahi Shimbun, citing sources at the Financial Services Agency (FSA), these digital assets will be regulated under the same rules as other financial instruments under the Financial Instruments and Exchange Act.

According to the publication, the FSA also intends to ask the government to lower tax rates in the next fiscal year. It is expected that the rates will be close to those applied to stock transactions.

Application of capital gains rules

If the agency succeeds in getting the initiative adopted, it could significantly change the current cryptocurrency taxation system in Japan, which traders often criticize. Currently, Japanese residents are required to report cryptocurrency profits as “other income,” which can increase the tax rate to 55% for citizens in the highest tax bracket. In most countries, such income is taxed as capital gains.

After the rule change, profits from the selected 105 cryptocurrencies will be taxed at a flat rate of 20%. The FSA has not yet made any official comments, but according to the newspaper, the list of “approved” coins was compiled based on a set of criteria: project transparency, financial reliability of issuers, technology stability, and price risk levels.

Fighting insider trading

The regulator also intends to step up the fight against insider trading in the domestic crypto market. The FSA intends to prohibit individuals and companies associated with issuers or crypto exchanges from trading when they have inside information, such as listing dates or data on the financial condition of a project. The regulator plans to submit its proposals to the budget session, which will take place in the first weeks of 2026.

In October, the FSA announced its readiness to revise the rules that will allow banks to acquire and store cryptocurrencies for investment purposes.