Japan aims to boost crypto growth under strict regulation.
Japan is likely to carve a different category for crypto assets, separate from stocks and bonds
Photo Credit: Unsplash/ Roméo A
Japan is reportedly moving to grant legal status to cryptocurrencies by revising the Financial Instruments and Exchange Act to include them as financial products. Led by the Financial Services Agency (FSA), this initiative aims to foster crypto industry growth under stringent regulatory oversight. However, curbing insider trading related to cryptocurrencies remains a top priority for regulators.
The FSA will be conducting an analysis of Japan's present frameworks, which needs amendment to include cryptocurrencies. This will be a closed-door process involving experts from the industry, Nikkei Asia said in a report on March 31.
By 2026, the FSA is expected to complete its analysis work and submit the reformed bill to the parliament for deliberation and clearance. Once crypto assets obtain the classification of “financial products”, all firms seeking any crypto investment or engagement will reportedly need to register with the financial authorities. For now, only crypto exchanges in Japan are required to obtain the necessary permissions.
Rise in Crypto Scams Prompt Japan to Make Changes
In 2024, a Chainalysis report had claimed that crypto-based money laundering and scam trends have grown in Japan. Last year's data by the Japanese National Police Agency (JNPA) also claimed that crypto scams made for 9.9 percent of the total 6,868 investment scams that were reported between January and August 2024.
Moving forward, Japanese regulators wish to tighten the noose around local crypto service providers as crypto-related scams and cybercrime continue to rise nationally and internationally, the Nikkei report noted.
Regulators are likely to carve a different category for crypto assets under the amended bill and not include them in the securities category with stocks and bonds. The rules to prevent insider trading, however, may be similar to the ones levied on traditional financial products.
More details on this bill amendment remain awaited for now.
Recent Crypto Highlights from Japan
Japan is taking gradual steps to explore and regulate the crypto sector. In September 2024, the FSA reduced tax rates on income generated from crypto activities to let small-scale individual investors retain some profits. Previously, crypto earnings were taxed between 15 percent to 55 percent in Japan. For its FY 2025 tax regime, the FSA reduced this tax rate to a flat 30 percent for corporate investors and 20 percent for retail investors.
The FSA is also in the process of examining adequate investor protection guidelines as crypto tokens are mostly used for investment purposes rather than payments.
Meanwhile, cryptocurrency exchanges in Japan are mandated to register with the FSA and adhere to the traditional Anti Money Laundering/Countering the Financing of Terrorism (AML/CFT) laws.
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