Japan approves crypto financial assets bill, tightens exchange rules

Japan has approved a “crypto financial assets bill” that classifies cryptocurrencies as “financial assets” under the Financial Instruments and Exchange Act (FIEA), moving away from the prior payment-focused Payment Services Act (PSA) framework. The change affects Japan crypto financial assets regulation by bringing crypto market conduct closer to securities markets. Under the crypto financial assets bill, exchanges and token issuers face stricter FIEA-style requirements, including enhanced disclosures, tighter custody/segregation rules, and explicit insider-trading prohibitions. Penalties for operating without proper registration or breaking market rules are also expected to become harsher, including potential criminal liability for serious violations. The bill also supports tax reform: a proposed shift from Japan’s historically punitive progressive crypto taxation (up to 55%) toward a flat capital-gains rate around 20%, with a 3-year loss carryforward window. This could reduce friction for retail traders and improve conditions for institutional participation. For traders, the key timeline remains that the bill is expected to pass Japan’s Diet in Q2 2026, with full enforcement in early 2027. Near term, watch for risk-on/risk-off moves as market participants price in regulation clarity and the possibility of regulated investment products, potentially including ETF structures.