Japan Advances Bill to Classify Crypto as Financial Product, Opening Door to Spot Bitcoin ETFs

Japan is moving to classify cryptocurrencies as financial products similar to stocks, a step that would allow spot Bitcoin exchange-traded funds to list in the country and sharply reduce taxes on crypto investment gains.

Bloomberg reported on June 11 that Japan's House of Representatives passed an amendment to the Financial Instruments and Exchange Act defining cryptocurrencies as financial products. The bill will be reviewed by the House of Councillors before final approval, and is set to take effect next year.

The centerpiece of the amendment is to classify cryptocurrencies such as Bitcoin and Ether as financial products akin to conventional securities. That would cut the tax on crypto capital gains from the current maximum of 55% to a flat 20% rate, matching stocks and bonds. The tax change is projected to take effect in 2028.

The bill also tightens insider-trading rules. It would impose fines and prison terms comparable to those for listed securities and raise the maximum sentence for selling unregistered crypto assets to 10 years from three years.

Masato Yoshizawa, an official at the Policy and Markets Bureau of Japan's Financial Services Agency, said the aim is to promote innovation by creating a sound trading environment. Japan is not trying to encourage cryptocurrencies unconditionally, but to foster healthy market growth, he added.

Industry participants said the bill would help reduce regulatory uncertainty in Japan's crypto market. Koichi Kano, Japan head at QCP Group, said market participants would be able to operate under the same rules.