Japan reclassifies crypto as financial products in landmark parliament vote

Japan's parliament completed the passage of a sweeping amendment to the Financial Instruments and Exchange Act on Wednesday, officially reclassifying cryptocurrencies including Bitcoin ↘ 0.29%, Ethereum ↘ 0.35%, and XRP ↘ 0.55% as financial products rather than payment tools. The House of Councillors approved the bill in a plenary session on July 15, according to Reuters and Japan's public broadcaster NHK.investing+2

The legislation represents the most far-reaching overhaul of Japan's crypto regulatory framework since exchanges were first brought under the Payment Services Act. Digital assets will now sit alongside stocks and bonds under the same investor-protection standards that govern traditional securities.bitcoinmagazine+1

From Payments to Financial Instruments

The bill, which received cabinet approval in April 2026 and cleared the lower house around June 10–11, strips crypto of its prior classification as a means of settlement and places it squarely within the securities-style framework administered by the Financial Services Agency. According to NHK, the new rules are expected to take effect within one year of promulgation, targeting fiscal 2027.kucoin+3

The amended law introduces insider trading prohibitions, mandatory annual disclosures for token issuers, and sharply increased penalties for unregistered operators. The maximum prison sentence for running an unlicensed crypto business rises from three years to 10, while the top fine jumps from 3 million yen to 10 million yen.bitcoinmagazine+2

Tax Cuts and ETF Pathway

Alongside the regulatory overhaul, lawmakers approved a plan to reduce taxes on crypto gains from a maximum of 55 percent to a flat 20 percent — matching the rate applied to stock investments. A three-year loss carryforward provision will also be available to investors. The tax changes are expected to take effect in January 2028.bingx+2

The reclassification also clears the legal path for spot cryptocurrency exchange-traded funds. Japan Exchange Group is considering domestic crypto ETF listings as early as 2027, with major financial institutions such as Nomura Holdings ↘ 1.20% and SBI Holdings ↘ 0.40% already preparing products, according to CoinPost.cryptonews+2

Stricter Oversight Ahead

Japan's Finance Minister Satsuki Katayama signaled support for the ETF push at the OpenQUICK 2026 conference on July 10, stating that Japan aims to advance research into lifting its domestic ban on crypto ETFs amid continued expansion of such products overseas.kucoin

The reclassification places Japan among the first major economies to bring crypto fully within a securities-grade regulatory perimeter. Existing crypto operators face tight compliance timelines: a two-week notification window, a three-month deadline to provide asset disclosures, and a six-month registration application period once the law takes effect.fintechobserver