Japan Uses a 20% Tax and FIEA Status to Treat Crypto More Like Stocks

Source: CoinEdition Original Title: Japan Uses a 20% Tax and FIEA Status to Treat Crypto More Like Stocks Original Link:

The Reform: Japan plans to replace its punitive 55% ‘miscellaneous income’ tax with a flat 20% rate in 2026.

The Shift: 105 specific cryptocurrencies will be legally reclassified as Financial Products, granting them the same status as stocks.

The Guardrail: Exchanges must now hold mandatory cash reserves (up to ¥40B) to guarantee user refunds in case of hacks.

The Japanese government is advancing a regulatory overhaul that will effectively integrate cryptocurrency into its national securities framework.

The ruling coalition is finalizing a proposal for the 2026 tax reform that would slash the maximum tax rate on digital asset gains from 55% to a flat 20%, aligning crypto taxation with equities and traditional investments.

A Shift Toward Uniform Taxation

For years, Japanese investors have seen progressive taxes on crypto profits, which discouraged active trading and often forced holders to sit on assets rather than risk large tax liabilities.

The government’s new plan places crypto under a separate taxation scheme that applies a fixed 20% levy, split between 15% national income tax and 5% resident tax for regional authorities.

With roughly 8 million active accounts and monthly trading volumes exceeding 1.5 trillion yen ($9.6 billion), crypto has already become a significant component of Japan’s retail investment environment.

How Regulators Intend to Reshape the Market

The Financial Services Agency (FSA) plans to reclassify cryptocurrencies under the Financial Instruments and Exchange Act (FIEA) by 2026, which would bring the industry under the same regulatory umbrella governing stocks and investment funds.

Bitcoin, Ethereum and nearly 100 other tokens would fall within this structure, while a whitelist of around 150 assets is being prepared to determine which tokens receive privileged regulatory status.

Approved tokens would enjoy benefits such as bank custody, clearer compliance rules and simplified accounting for institutions. Assets that fail to meet the whitelist standards would face restrictions and limited access to exchanges, creating a two-tiered ecosystem.

Also, the FSA seeks to require exchanges to establish liability reserves similar to those maintained by securities firms to ensure customer compensation in cases of theft or operational failure.

The agency is also considering insurance-based models to ease the financial burden of maintaining these reserves. A legal mechanism would additionally allow administrators to return assets directly to customers if an exchange collapses or if operators lose control of the platform.