Japan Eyes 20% Flat Tax and New Legal Status for Crypto

Japan's Financial Services Agency (FSA) began deliberations on moving crypto assets, including Bitcoin, into the Financial Instruments and Exchange Act (FIEA) framework. 

The FSA’s proposal would reclassify crypto assets as financial products under the FIEA and enable domestic Bitcoin exchange-traded funds, while the Ministry of Finance separately proposes a flat crypto tax rate of approximately 20%. This designation would align crypto with stocks and bonds in standard treatment.

The regulatory review connects to the government's “investment nation” strategy outlined in the Action Plan for Attracting FDI (approved May 13, 2024) and the Grand Design and Action Plan for a New Form of Capitalism 2024 Revised Version (approved June 21, 2024).

While the New Form of Capitalism Action Plan does not explicitly mention Web3 or NFTs, the Ministry of Economy, Trade and Industry (METI) and the LDP’s Digital Policy Group propose leveraging Web3 and digital assets to address social challenges and promote regional resources globally.

The current tax system treats crypto gains as comprehensive income, with rates reaching up to 55%. Under the proposed changes, crypto assets would face a separate self-assessed tax of roughly 20%, matching the rate applied to stock market gains.

As of February 2025, Japan’s crypto exchanges reported approximately 12.31 million user accounts, while total deposit balances stood at roughly ¥4.5 trillion as of December 2024. Global fund flows into crypto experience mixed trends: while some institutional investors increased exposure to Bitcoin ETFs in early 2025, hedge funds trimmed positions and only a limited number of U.S. pension funds have begun modest allocations.

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The regulatory change could clear the path for domestic Bitcoin ETFs, expanding access for both institutional and retail investors. The FIEA framework would provide stronger investor protection measures compared to current regulations.

The Financial System Council will debate the proposal at its June 25 meeting. If approved, the change would represent a shift from the current restrictive approach toward greater utilization of crypto assets in Japan's financial system.