Japan Rewrites Crypto Rules: Securities Law, ETFs, and Tax Reform

Japan's lower house passed the FIEA amendment on June 11, moving crypto under securities law and opening the legal path for spot ETFs and institutional capital.

Key Takeaways

FIEA amendment passed lower house June 11; upper house pending.
Crypto tax drops from 55% to flat 20% in 2028.
Loss carryforward offsets crypto gains only, not stock gains.
SBI filed Bitcoin and XRP ETFs targeting $32B AUM.
Up to half of Japan’s 27 exchanges may consolidate.

Japan’s lower house passed the FIEA amendment on June 11, 2026, advancing legislation the Cabinet formally submitted to the National Diet on April 10, following the Financial Services Agency’s framework review.

The bill moves cryptocurrencies out of the Payment Services Act and into the Financial Instruments and Exchange Act (FIEA), the same legal framework governing stocks, bonds, and investment trusts. It heads to the upper house for final approval, where passage is widely expected, with implementation due within one year of promulgation, targeting fiscal 2027.

The reclassification is not cosmetic. Every downstream rule, disclosure obligations, custody standards, insider trading enforcement, and investor protections, is determined by which legal container an asset sits in. The FSA stated its case directly: “The FIEA is based on the concept of building a comprehensive investor protection framework covering a wide range of highly investment-oriented financial products,” adding that “crypto transactions conducted by users are similar to securities transactions”, the regulatory justification for the structural shift.

FIEA Tax Overhaul: 20% Flat Rate and Loss Carryforward Rules

The headline change is the tax rate, from a maximum 55% under miscellaneous income to a flat 20% matching equities, effective January 1, 2028 per Japan’s 2026 Tax Reform Outline. The bill also adds a three-year loss carryforward – but with a constraint that matters for investors: those losses can only offset future crypto gains, not stock or equity gains. Previously, crypto holders who rode out a drawdown had no offset mechanism at all. The carryforward removes that asymmetry within the crypto asset class.

Context for the scale of suppressed demand: Japanese investors poured $21.7 billion into XRP alone through centralized exchanges between July 2024 and June 2025 – under the 55% tax ceiling. The direction of flows once that drops to 20% from 2028 is not difficult to project.

Crypto ETFs and Exchange Consolidation Under FIEA

FIEA classification enables pension funds, insurers, and asset managers to hold crypto ETFs through the same compliance infrastructure they use for equities. SBI Holdings has already filed for Bitcoin and XRP ETFs on the Tokyo Stock Exchange, targeting ¥5 trillion ($32 billion) in AUM within three years of approval. The FSA is targeting fiscal 2028 for first approvals. Japan’s three megabanks are also jointly developing a shared yen stablecoin targeted for 2027, a parallel signal that the country’s largest financial institutions are building infrastructure, not just waiting for regulation to settle.

That same institutional opening carries a direct cost for smaller operators. Japan currently has 27 registered crypto exchange operators. Meeting FIEA’s Type 1 Financial Instruments Business standards, capital requirements, auditing, reporting systems, was designed for securities firms, not crypto startups. According to Shohei Matsumoto, Executive Officer at Tokyo-based crypto consultancy Pacific Meta, it would not be surprising if around half of Japan’s exchanges disappeared under the tighter regime. The market opens to institutional capital at the same moment it closes to undercapitalized operators.

One further consequence: Metaplanet, which built its equity premium around being Japan’s only listed Bitcoin proxy, now faces direct ETF competition. When investors can access Bitcoin through a regulated fund, the premium for the listed vehicle shrinks. The FIEA framework also allows banks and insurance companies to hold crypto and register as licensed operators, a shift already visible on the ground, with at least one Japanese conglomerate already rewarding depositors with Bitcoin, Ethereum, and XRP.

Stablecoins are excluded from the FIEA reclassification and remain under the Payment Services Act as electronic payment instruments.