Japan’s FSA Proposes to Usher Crypto Assets Under the Financial Instruments and Exchange Act

Japan’s Financial Services Agency (FSA) unveiled a pivotal proposal on June 24, 2025, aiming to integrate crypto assets more comprehensively within the existing Financial Instruments and Exchange Act.

This significant development, slated for review by the Financial System Council on June 25, carries profound implications for Japan’s rising digital asset landscape. It could potentially usher in the era of Bitcoin Exchange-Traded Funds (ETFs) and introduce a more favorable tax regime for gains from crypto assets.

FSA Proposes to Integrate Crypto Assets

The proposed new rules could significantly alter Japan’s cryptocurrency landscape. If Japan approves Bitcoin ETFs, it will join other countries in accepting crypto for significant investments. This action would bring more money into the country and make domestic crypto exchanges more critical.

Moreover, these more explicit rules offer fairer and simpler taxes for investors of all sizes. Instead of a tax rate that previously could reach 55%, crypto gains may now incur a fixed rate of 20%. This change is expected to attract more participants to the market and foster greater trust in digital assets.

Interestingly, in April 2025, the Financial Services Agency (FSA) released a paper titled “Examining the Structure of Regulatory Frameworks Related to Crypto Assets.” This paper highlights critical areas that require attention, such as the need for stronger oversight and greater transparency in the cryptocurrency market.

The paper also discusses preventing insider trading and putting in place specific rules for the industry, like the well-known “travel rule” and how to handle crypto earnings from holding assets (staking).

Regulatory Objectives

The FSA’s plan hinges on dividing crypto assets into two groups. Type 1, labeled “Funding/Business Crypto Assets,” includes assets used for capital raising, such as some utility tokens. Type 2, referred to as Non-Fundraising/Non-Business Crypto Assets, encompasses assets such as Bitcoin and Ethereum, which individuals do not use for initial fundraising purposes.

This division aims to create more tailored rules. The FSA aims to enhance understanding of Type 1 assets by clearly outlining how raised funds will be utilized. However, the agency acknowledges the difficulty in directly linking Type 2 assets to specific companies, which complicates the enforcement of strict reporting requirements.

To further demonstrate its commitment to strong regulations, Japan’s FSA plans to introduce a specific cryptocurrency bill by 2026. The new law will officially treat cryptocurrencies as traditional stocks and bonds, meaning they will be subject to the same strict rules against insider trading and market manipulation that apply to regular financial products.

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