Points of Focus

• Japan’s crypto bill cleared the lower house and now heads to the upper house.
• It would cut crypto taxes to 20% on regulated platforms.
• Crypto ETFs could launch next year if the bill passes.

Japan’s lower house passed legislation on June 11 that reclassifies cryptocurrency as a financial instrument under the Financial Instruments and Exchange Act, moving it out of the Payment Services Act framework it has occupied since 2017 and placing it under the same regulatory architecture as equities and bonds.

The practical consequences are significant. The bill creates a legal pathway for regulated crypto exchange-traded funds (ETFs), cuts the maximum capital gains tax rate on qualifying crypto assets from 55% to a flat 20%, introduces a three-year loss carryforward system, and aligns insider trading penalties for crypto with those applied to listed securities. The bill moves next to the upper house before taking effect.

From 55% to 20%, and what that gap has been costing Japan

The tax arithmetic has been stark. Under the current system, crypto profits are classified as miscellaneous income and taxed at Japan’s progressive income tax rates, which reach 55% at the top bracket, including local taxes. A retail investor in Japan holding Bitcoin (BTC) through a strong cycle has faced a maximum rate nearly three times higher than an investor in the United States holding the same asset.

The reform sets a flat 20% rate, broken down as 15% national income tax and 5% individual inhabitant tax, applicable to spot trading, derivatives, and ETFs involving specified crypto assets traded on Financial Services Agency (FSA)-registered platforms. The rate matches equities exactly. The loss carryforward, unavailable under the current regime, allows losses from one year to offset gains in the following three, a structural feature standard in every mature equity market.

ETF pathway opens; Bitcoin ETF approval likely in 2028

Japan Exchange Group has indicated crypto-linked ETFs could begin listing as early as next year, pending the bill’s full passage. However, a structural gap remains. Bitcoin ETF approval under the FSA’s framework is expected to align with the full tax reform rollout in 2028, creating a two-year window in which the legal pathway exists but the most institutional-grade product is not yet available.

SBI Holdings chairman Yoshitaka Kitao has publicly criticized that timeline as too slow, arguing Japan risks falling behind the United States and Middle Eastern markets that already offer regulated Bitcoin ETF products.

When Yoshitaka Kitao says "Too late," the industry listens. 🏛️🚫

As the head of SBI Holdings and a massive advocate for XRP, Kitao knows Japan can’t afford to wait until 2028 for Crypto ETFs. While regulators deliberate, SBI is already building the infrastructure. Speed is… pic.twitter.com/3moC5wI6x0

— 𝗕𝗮𝗻𝗸XRP (@BankXRP) January 25, 2026

Japan’s major banks are not waiting for ETF approval

The bill advances alongside parallel moves from Japan’s largest financial institutions. MUFG Bank, Sumitomo Mitsui Banking Corporation, and Mizuho Bank announced plans this week to begin live transactions using a jointly issued stablecoin during fiscal 2026, following an FSA-backed pilot that tested stablecoin issuance and cross-border payments in late 2025. Stablecoins remain regulated under the payments framework rather than the new securities regime.

Japan has an estimated 13 million domestic crypto traders. The reform’s combined effect, lower taxes, a loss-offset mechanism, and regulated investment products are designed to bring a significant portion of that base back onshore from the foreign platforms and offshore structures that a 55% marginal rate had previously made economically rational to use.