Japan Recognizes Cryptocurrencies as Financial Products Under Law

Japan has made significant strides in recognizing cryptocurrencies as financial products under law. The country's Upper House passed amendments to the Financial Instruments and Exchange Act and the Funds Settlement Act, classifying crypto assets as 'financial instruments' for the first time.

The bill introduces insider trading regulations for the crypto sector, banning transactions based on undisclosed material information, and grants investigative authority to the Securities and Exchange Surveillance Commission. The maximum penalty for unlicensed operations has been raised to 10 years' imprisonment or a fine of 10 million yen.

In terms of tax reforms, the bill shifts taxation on crypto gains from comprehensive taxation with a top marginal rate of 55% to separate self-assessed taxation at approximately 20%, alongside a three-year loss carryforward provision. This change is set to take effect on January 1, 2028.