coindesk.com
Japan reclassified cryptocurrencies as financial instruments, a structural shift that establishes the legal framework for separate taxation of crypto assets and for future crypto exchange-traded funds (ETFs).
The legislation approved by Parliament on Wednesday amends the Financial Instruments and Exchange Act and the Payment Services Act (PSA). It shifts crypto from a framework in which it was primarily treated as a payment tool to one that treats it as an investment alongside other financial instruments. The new rules are expected to take effect in 2027.
The new framework also removes a key legal hurdle for future spot bitcoin exchange-traded funds (ETFs), although lawmakers did not approve any ETF products. Financial Services Agency officials said Japan will now consider developing a regulatory framework for crypto ETFs.
The legislation raises the maximum prison term for unregistered crypto operators from three years to 10 years and increases the maximum fine from 3 million yen ($18,500) to 10 million yen. It also introduces stricter insider-trading rules and expands disclosure requirements for crypto issuers and exchanges.
Lawmakers also approved the framework for reducing the current crypto tax burden from as much as 55% to 20%, although the lower rate is not expected to take effect until 2028.
The tax-cutting proposal was introduced late last year with the support of the government and the ruling coalition. That new structure splits the 20% tax between the national government and regional authorities at 15% and 5%, respectively.
The crypto rules will require cryptocurrency issuers to provide regular disclosures, while exchanges will face stricter investor protection and reporting requirements.