The Japanese Senate has adopted amendments to the Financial Commodity Transactions Act, and the legal position of encrypted assets in Japan has been adjusted accordingly. Assets such as bitcoin, Ethera, XRP will no longer be considered primarily as payment instruments, but will be incorporated into the financial product regulatory system, which will also bring Japan’s encryption market closer to the traditional securities market.
Regulatory standards shift to financial products
Previously, Japan ' s primary regulatory authority over encrypted assets was based on the Payment Services Act, which focused on payment and settlement attributes. Following the amendment, the relevant assets will be transferred to the framework of the Financial Commodity Transactions Act, with a shift in the focus of regulation towards investment attributes, information disclosure and transaction behaviour.
This change is also considered to be Japan's pavement for spot-encrypted ETF. It is mentioned that the regulatory layer is promoting the landing of the relevant products, with the goal of being launched at the Tokyo Stock Exchange in 2027 or 2028. Nomura Holdings and SBI Holdings are already preparing their products.
New regulations added to the insider trade ban.
The new framework introduced a number of rules common to traditional financial markets, with emphasis on the prohibition of the use of undisclosed information transactions, the requirement for the annual disclosure of operational and financial information by the issuer of the currency, and the imposition of a 2 million yen diaspora investment cap on high-risk coins.
The penalties have also been increased in parallel. The maximum sentence for illegal encryption operations will be raised from 3 to 10 years; the maximum fine will be raised from 3 million yen to 10 million yen. According to the Government of Japan, these adjustments are aimed at improving market security and enhancing investor protection.
The rate is to be reduced to 20%.
In addition to regulatory reforms, Japanese parliamentarians are moving forward with the adjustment of the encryption system. According to reports, the current maximum rate for the proceeds of encryption could be 55 per cent and the follow-up plan would be harmonized to 20 per cent, which would be consistent with the rate for equity investments.
Another proposed measure is the introduction of a three-year loss carry-over mechanism. In the event of a loss in an investor ' s previous transaction, a portion of the tax may be deducted from future tax on the proceeds of encryption. If the arrangement is approved, the tax adjustment is expected to be implemented in 2028.
Overall, Japan is moving from the regulation of payment scenarios to the regulation of investment markets. For local trading platforms, issuers and agency product layouts, compliance requirements will increase significantly, but market access and product space are expanding simultaneously.