Japan Reclassifies Crypto as Financial Asset, Cuts Tax to 20%

Japan's parliament approved a law Wednesday that reclassifies cryptocurrencies as financial instruments, shifting them from a payment-focused framework to one that treats them alongside stocks and bonds. The change, which amends the Financial Instruments and Exchange Act and the Payment Services Act, is expected to take effect in 2027.

The legislation also sets the stage for a sharp reduction in crypto taxes. Lawmakers approved a framework that would cut the top rate from 55% to 20%, though the lower rate will not apply until 2028. The 20% levy splits between the national government and regional authorities at 15% and 5%, respectively. The tax-cutting proposal was introduced late last year with backing from the government and the ruling coalition.

The reclassification removes a key legal obstacle for spot bitcoin exchange-traded funds, though lawmakers did not approve any ETF products directly. Financial Services Agency officials said Japan will now consider developing a regulatory framework for crypto ETFs, according to a statement after the vote.