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FSA's Regulatory Shift: A New Era for Crypto in Japan

Japan’s Financial Services Agency (FSA) has proposed significant changes to cryptocurrency regulation under the Financial Instruments and Exchange Act (FIEA).

This reclassification aims to define cryptocurrencies as “financial products,” potentially paving the way for crypto exchange-traded funds (ETFs).

One of the key components of the FSA's proposal includes introducing a flat 20% tax on digital asset income, replacing the progressive system that could tax gains up to 55%.

Such a shift could make crypto investing more appealing to retail and institutional investors alike.

This initiative aligns with the Japanese government's broader “New Capitalism” strategy, designed to foster an investment-oriented economy.

The FSA noted a rise in crypto ownership among domestic investors, with over 12 million active crypto accounts holding more than 5 trillion yen (approximately $34 billion) as of January 2025.

Moreover, participation in crypto markets has surpassed traditional financial products like foreign exchange and corporate bonds among tech-savvy investors.

The FSA's proposal also responds to increasing global institutional interest in cryptocurrencies, with notable entities such as Goldman Sachs and US pension funds investing in Bitcoin ETFs.

In addition to regulatory changes, Japanese financial groups are exploring stablecoin commercialization, signaling deeper integration of digital assets into the economy.

As Japan takes these steps, the landscape of cryptocurrency investment in the country is poised for a transformative evolution.