Japan plans 20% tax on crypto: new rules that could change the game

Japan is preparing for its biggest crypto regulatory reform so far.
The Financial Services Agency (FSA) has proposed a package of measures that would:

• give cryptocurrencies the status of “financial products”
• introduce a flat 20% tax on trading gains instead of today’s rates of up to 55%
• apply insider trading rules to the crypto market for the first time
• allow banks and insurance companies to offer crypto to clients through their brokerage and securities subsidiaries

If these changes pass the Diet in 2026, Japan could become one of the most attractive regulated crypto hubs in the world – combining lower taxes with stricter oversight.

How is crypto taxed in Japan today?

Right now, profits from cryptocurrencies in Japan are treated as “miscellaneous income”.
In practice, that means:

• progressive tax brackets,
• for top earners, an effective rate of up to 55% tax on crypto gains,
• crypto profits are added on top of other income when calculating tax.

For active traders and investors, that is a huge burden. That’s why many Japanese crypto enthusiasts either avoid trading domestically or move activity and even residency to more favorable jurisdictions.

What exactly is the FSA proposing?

According to the current proposal:

• 105 of the most traded cryptocurrencies in Japan (including Bitcoin and Ethereum) would be classified as financial products
• gains from trading them would be taxed at a flat 20% rate, similar to capital gains on stocks
• they would lose the “miscellaneous income” status, meaning the punitive effective rate of up to 55% would disappear
• exchanges would be required to provide mandatory risk disclosures: volatility, token characteristics, liquidity, and so on
• insider trading rules would be applied – banning trading based on non-public internal information (e.g. upcoming listings that haven’t been announced yet)

In addition, the regulator is considering:

• allowing banks and insurance companies to offer crypto to clients via licensed securities subsidiaries
• gradually removing the current ban on banks holding crypto as an investment on their own balance sheets

The goal is to combine more favorable tax treatment with tighter supervision, so the market becomes fully “official” and more attractive for domestic investors.

What does this mean for everyday traders and investors?

If the proposal is adopted in its current form, several big changes await Japanese crypto investors:

1. Lower and more predictable tax

Instead of risking entry into the top tax bracket and an effective rate of up to 55%, traders would face:

• a flat 20% rate on realized gains
• taxation roughly similar to capital gains on stocks

In practice, that moves crypto in Japan from a “punitive” tax zone into the realm of standard financial products.

2. Easier tax planning

A flat rate means:

• easier planning of when to take profits
• less fear of a “tax shock” after a good year
• a higher chance that investors will stay as residents instead of moving their tax base abroad

3. More channels for buying crypto

If banks and insurers get the green light to offer crypto via their securities arms, the average user will find it much easier to:

• buy crypto directly from banking apps they already use
• access combined products (e.g. investment accounts with a crypto allocation)
• enter the market through familiar, supervised institutions

Of course, all of this comes with the requirement that institutions clearly disclose volatility risks and that the regulator has real oversight powers.

What does it mean for the industry, exchanges, and projects?

For the crypto industry in Japan, the FSA proposal is a mix of major opportunity and additional obligations.

Opportunities

• More domestic investors – lower taxes make trading and investing both psychologically and financially more acceptable
• Greater legitimacy – classifying crypto as a financial product signals that the state plans to live with it long term, rather than treating it as a temporary curiosity
• Entry of big players – banks, insurers, and institutional investors are more likely to join when the legal framework resembles traditional finance

Obligations and risks

• Stricter compliance – disclosures, risk statements, transaction monitoring, and preventing insider trading
• Pressure on smaller exchanges – smaller players may struggle to meet all reporting and oversight requirements
• More layers of KYC/AML – tighter alignment with anti–money laundering and counter–terrorist financing rules

In short: less “Wild West”, more Wall Street–style rules.

Possible scenarios and open questions

Even though the idea sounds attractive for investors, several questions remain open:

• Timing – the proposal has to be folded into the regular tax reform and legal amendments during 2026; changes and delays in parliament are always possible.
• Details of calculation – how will staking, DeFi yields, NFTs, and other forms of crypto assets be treated?
• Boundary between retail and professional investors – will there be additional rules for “professional” investors, funds, and companies?
• Market reaction – will lower taxes really lead to a mass return of domestic traders, or will offshore and more anonymous platforms remain popular?

For now, it’s clear that Japan is positioning itself as a regulated yet crypto-friendly ecosystem: taxes are coming down, but in exchange the industry is stepping into a more serious regulatory framework.

Conclusion

Japan’s plan to:

• classify cryptocurrencies as financial products,
• introduce a flat 20% tax on gains,
• and apply insider trading rules,

could be a turning point for its local crypto market.

For investors, it promises lower and more predictable taxes. For the industry, it means more oversight but also more legitimacy. And for other countries, this could become a model of how to combine tax relief with serious regulation, instead of keeping crypto permanently at the margins of the financial system.

Disclaimer: This article is for informational purposes only and does not constitute tax, legal, or investment advice. Every reader should consult their own tax and legal advisors before making financial decisions.