Japan Cuts Crypto Taxes, Paves Way for Regulated ETFs

Japan has taken a significant step forward in regulating its cryptocurrency market by advancing legislation that would reduce taxes, introduce exchange-traded funds (ETFs), and place digital assets under the same regulatory framework as stocks.

The bill, which was approved by Japan's lower house on Thursday, aims to establish clearer rules for digital asset trading while responding to growing participation from institutions and retail investors. The proposal is expected to move through the upper house before taking effect next year, with tax changes set to take effect in 2028.

Under the new legislation, the tax treatment of crypto gains would be reduced from a maximum rate of 55% to a flat 20%, matching stocks and bonds. The bill also introduces penalties for crypto insider trading, which would be aligned with those applied to listed securities. Additionally, authorities plan to increase the maximum prison sentence for unregistered crypto sellers from three years to 10 years.

Regulators have framed the reforms as part of a larger effort to foster innovation and create a sound trading environment. Masato Yoshizawa, a representative from Japan's Financial Services Agency policy and markets bureau, told Bloomberg that regulators were seeking healthy market growth rather than endorsing crypto assets themselves.