Japan Considers 20% Flat Tax on Crypto Gains, Prepares ETF Path

• FSA proposes 20% flat tax on crypto gains, replacing progressive rates up to 55%.
• Planned 2026 legislation would classify crypto as financial products, enabling ETFs.
• JPYC stablecoin set for approval, targeting ¥1 trillion issuance within three years.

Japan’s Financial Services Agency (FSA) is preparing to change how cryptocurrencies are taxed, with a plan to treat them more like listed stocks. According to a report by Nikkei, the regulator intends to request revisions to the tax code for the 2026 fiscal year. The move would lower the burden on digital asset investors and create new opportunities for regulated financial products, including crypto exchange-traded funds.

Flat 20% Rate Proposed for Crypto Income

Confirmed via an X post by Rexster, the request, scheduled for submission at the end of August, would shift digital asset income into a separate tax category. Under the proposal, gains from crypto trading would face a flat 20% tax rate. This structure matches the rate applied to capital gains from equities.

At present, crypto gains are considered to be miscellaneous income and are liable to progressive tax rates up to 55%. The industry has also requested an allowance of a three-year loss carry-forward, just as is provided under other classes of investment. These changes are intended to bring digital assets in harmony with wider financial regulations.

Legislative Changes for ETF Development

Beyond taxation, the FSA plans to introduce legislation in 2026 that would redefine the legal status of cryptocurrencies. The bill would bring digital assets under the Financial Instruments and Exchange Act, classifying them as financial products. At present, crypto is regulated under the Payment Services Act as a means of payment.

This reclassification would allow the development of domestic crypto exchange-traded funds. Japanese financial institutions have long called for a regulatory framework enabling such products. By shifting the status of crypto, the FSA aims to clear the way for ETF offerings and strengthen the country’s competitiveness in the global digital asset market.

Yen-Pegged Stablecoin Approval Expected

In conjunction with the tax reforms, the FSA is in the process of giving a go-ahead to the first regulated Yen-denominated stablecoin in Japan. The JPYC stablecoin is issued by a Tokyo-based fintech company and will be launched later this fall.

Under company plans, the issuer is planning to issue up to one trillion yen ($6.78 billion) worth of JPYC within the next three years. The launch of a regulated stablecoin would give stakeholder investors and businesses there an on-chain currency linked directly to Japanese yen.

All these combine to suggest a concerted effort by regulators through tax reform, ETF framework, and stable coin approval. These actions demonstrate the fact that Japan strives to provide more transparent regulation and promote its use in the Japanese financial market.