Japan Sets 2026 Crypto Tax Shift to Match Stocks and Spark ETF Boom

Japan’s Financial Services Agency (FSA) has announced a significant overhaul of the country’s cryptocurrency tax regime, with the goal of aligning digital assets more closely with traditional financial instruments such as stocks. The agency plans to propose a flat 20% tax rate on crypto gains for the 2026 fiscal year, replacing the current progressive tax system that can push effective tax rates as high as 55% when combined with local inhabitant taxes. The shift is part of broader reforms aimed at fostering a more competitive crypto market and facilitating the launch of domestic cryptocurrency exchange-traded funds (ETFs) [1].

Under the current framework, gains from cryptocurrency transactions are classified as "miscellaneous income" and aggregated with other sources of income, subjecting investors to higher marginal tax brackets. The FSA’s proposed change would move crypto gains into a separate tax category, similar to how stock and foreign exchange (FX) gains are treated. This would allow investors to carry forward capital losses for up to three years, a feature already available for equities, which could improve liquidity and reduce the financial burden on traders [1].

The tax reform is closely tied to a legislative shift that would reclassify crypto as a "financial product" under the Financial Instruments and Exchange Act (FIEA). This reclassification would enable the FSA to apply existing investor protection rules—such as disclosure requirements, insider-trading prohibitions, and market surveillance—to the crypto space. It is also a critical step toward enabling the launch of domestic crypto ETFs, which have so far been absent in Japan despite the country’s well-developed financial markets [1]. The FSA estimates that Japan’s ETF market is valued at over ¥80 trillion ($560 billion), yet no crypto ETFs have yet received domestic approval. Investors have instead relied on U.S.-listed products and regulated trusts in Singapore to gain exposure.

In parallel with the tax overhaul, the FSA is preparing to approve the country’s first yen-denominated stablecoin, JPYC, issued by a Tokyo-based fintech firm. The token, which will be backed 1:1 by bank deposits, aims to issue up to 1 trillion yen ($6.8 billion) over the next three years. JPYC has already piloted a non-blockchain version under Japan’s Fund Settlement Act and has partnered with Minna Bank, a digital lender under the Fukuoka Financial Group, to meet licensing requirements [1].

The FSA’s proposals reflect a broader regulatory strategy to move beyond investor protection—prioritized after major incidents such as the 2014 Mt. Gox collapse and the 2018 Coincheck hack—toward active market development. By 2026, Japan aims to establish a more favorable ecosystem for digital assets that supports both retail and institutional participation. The agency also plans to establish a Digital Finance Bureau within the FSA to centralize oversight of crypto and digital assets, underscoring the growing integration of digital finance with traditional financial systems [3].

Industry groups have welcomed the reforms, noting that they align with global trends in crypto regulation and could help Japan compete with other financial hubs in Asia. The Japan Cryptoasset Business Association (JCBA) has long lobbied for equity-like treatment of crypto gains, arguing that the current system undermines market confidence and drives startups overseas. With tax clarity and a regulatory framework in place, Japan is positioning itself to become a leading crypto market in the region [1].

Source:

[1] title1 (https://financefeeds.com/japan-fsa-plans-flat-20-crypto-tax-opening-door-to-etfs-by-2026/)

[2] title2 (https://coingape.com/japans-fsa-pushes-bold-crypto-tax-reform-boosting-prospects-for-etf-listings/)

[3] title3 (https://cryptodnes.bg/en/japan-prepares-wweeping-crypto-reforms-tax-cuts-and-etf-approval-on-the-horizon/)