From beincrypto by Lockridge Okoth

Japan’s FSA (Financial Services Agency) is considering lifting the ban on Bitcoin ETFs (exchange-traded funds) and reducing the tax burden on crypto investors.

The proposed changes aim to reclassify crypto assets as financial products akin to securities. Such a paradigm shift would enhance investor protection and boost mainstream adoption.

Japan Considers Tax Reforms and Crypto ETF Approval

Japan’s FSA is holding closed-door study sessions with industry experts to discuss regulatory overhauls and market expansion. Specifically, the agency wants to evaluate whether the current regulatory framework can accommodate the growing crypto market.

“The aim is to protect investors by requiring businesses to disclose more detailed information,” local media reported.

Accordingly, they plan to announce a formal system reform policy by June 2025. Similarly, legal amendments will likely be proposed at the 2026 National People’s Congress session. This initiative follows Japan’s broader effort to integrate digital assets into its financial system while ensuring stricter compliance and transparency.

One of the most anticipated changes is reducing Japan’s steep tax rates on crypto profits, which currently reach up to 55%. The FSA is exploring a more favorable tax regime that could decrease the rate to 20%. Such a move would align with capital gains taxes on other financial instruments like stocks.

Additionally, approving Bitcoin spot ETFs would allow institutional investors to participate in the market more securely. According to Hay Insights, Japan, the country’s financial data hub, has lagged behind other markets, such as the US and Canada, in embracing Bitcoin ETFs.

“These financial instruments [Bitcoin ETFs] have gained traction in markets like the United States and Canada, where regulators have approved spot and futures-based ETFs. However, Japan’s approach remains cautious, reflecting its stringent regulatory environment,” HayInsights wrote.

Analysts believe regulatory clarity and lower taxation will attract more institutional and retail investors despite the challenges. It would strengthen Japan’s position as a global crypto hub if it does happen.

Meanwhile, Japan’s positive stance on cryptocurrencies follows a series of regulatory measures to tighten oversight. Two months ago, the FSA warned KuCoin, Bybit, Bitget, and other exchanges about unregistered operations. As BeInCrypto reported, the regulator highlighted concerns about unlicensed trading platforms operating within the country.

Now, Japan has urged app stores to remove these platforms entirely, signaling a crackdown on unregulated crypto businesses.

Furthermore, the agency conducted a comprehensive review of crypto laws four months ago. BeInCrypto reported that tax cuts were a key focus ahead of Japan’s October elections. The move was perceived as an effort to garner support from pro-crypto lawmakers and investors.

Around the same time, Japanese lawmakers proposed adopting Bitcoin reserves and fostering DOGE policy innovation, following in the footsteps of the US.

Therefore, the potential approval of Bitcoin ETFs and tax reductions would mark a significant milestone for Japan’s crypto industry. If implemented, these measures could position Japan as a leading jurisdiction for digital asset investment. Like in the US, the development would attract domestic and international capital.

However, challenges remain. Regulators must strike a balance between fostering innovation and maintaining financial stability. The FSA’s ongoing consultations with industry experts and stakeholders will be crucial in shaping a regulatory framework that encourages responsible growth.