The legal positioning of encrypted assets will shift from payment instruments to investment products, following the adoption of a law by the Diet of Japan. The system is expected to enter into force in 2027, which marks a reorientation of Japan ' s regulatory focus on the encryption market.

Transfer from payment framework to financial regulation

This amendment also amended the Financial Commodity Transactions Act and the Payment Services Act. Legislators believe that encrypted assets are more than simply for payment purposes and that it is difficult for existing systems to cover their investment attributes and therefore need to be integrated into a more complete financial regulatory system.

Upon completion of the adjustment, encrypted assets would be legally closer to other financial instruments and would provide a basis for the subsequent design of separate tax regimes and rules for traded products.

Reduction of physical bitcoin ETF barriers

The bill does not directly approve any spot bitcoin ETF, but removes one of the main legal obstacles to the landing of the relevant product. Officials from the Financial Services Agency of Japan indicated that the next step would be to consider establishing a regulatory framework for encryption of ETFs.

This means that the future of the Japanese market is opening up the institutional space for bitcoin ETF, but there is no clear timetable for the approval of specific products.

Increased penalties and proposed lower rates

The new law increases the penalties imposed on unregistered encryption operators from 3 to 10 years ' imprisonment and a maximum fine from 3 million yen to 10 million yen. At the same time, it introduced stricter rules for insider trading and expanded information disclosure requirements for issuers and trading platforms.

  • Up to 10 years maximum sentence for unregistered business
  • Up to 10 million yen.
  • Strengthened disclosure obligations of issuers and exchanges

In addition to regulatory adjustments, legislators have approved a framework for reform of the encryption system. At present, the rate of the tax on encrypted income can be up to 55 per cent, with a planned downward adjustment to 20 per cent from 2028.

  • The new rate is set at 20%.
  • State taxes 15%
  • Local taxes 5%

On the whole, Japan's current amendment touches on three main lines of regulation, taxation and trading. For the local encryption industry, the compliance threshold will be raised and institutional products and the institutional space for clearer taxation will be expanded.