Compass Investments

To date, cryptocurrencies in Japan have been regulated under the Payment Services Act (PSA), a regulation enacted after the 2014 Mt. Gox collapse that predominantly treated digital assets as means of payment.

However, with the introduction of a new system under FIEA, proposed by the Financial Services Agency (FSA), things are changing dramatically. Bitcoin, Efirium, XRP and 102 other tokens listed on licensed Japanese exchanges are now legally equivalent to securities such as stocks and bonds.

Such reclassification has far-reaching implications. Finance Minister Satsuki Katayama, who became the country’s first woman to hold the post, emphasized that the purpose of the reform is to “encourage the flow of productive capital, ensure market integrity and transparency, and protect investors.

These are not just declarations, but provisions specific to securities laws.

RESULT: Japan has officially approved a legislative initiative recognizing bitcoin and other cryptocurrencies as financial assets.

The amendments regulate specific enforceable measures, harmonizing crypto markets with traditional securities regulations.

Insider trading on crypto markets is now strictly prohibited: speculation in digital assets using non-public material information carries the same legal consequences as fraud on stock exchanges.

Token issuers are required to annually disclose information on technology, market volatility and management principles, which was not previously required in the Japanese cryptocurrency market.

The exchanges themselves will be renamed from “crypto exchange operators” to “crypto asset trading operators, reflecting their new status as regulated financial intermediaries.

The sanctions have been significantly tightened. Operating without a proper license now carries up to 10 years in prison (instead of the previous 3), and fines have increased from 3 million yen to 10 million yen (about $62,800). Such measures are always taken seriously by the regulatory departments of financial institutions.

At the same time as amending legislation, Tokyo is pursuing tax reform that could be just as important. Currently, cryptocurrency gains in Japan are taxed as ordinary income on a progressive scale that can go as high as 55% – one of the highest effective tax rates on crypto profits among developed countries.

The proposed bill would introduce a flat 20 percent capital gains tax, similar to that applied to stock market gains, as well as the ability to carry forward losses for three subsequent years.

Such a loss carryforward mechanism is already in place for equity investments in Japan, but has not previously been extended to cryptocurrencies. More than 12 million active cryptocurrency accounts in Japan are waiting for this tax equalization.

If approved, the reform could unleash a significant amount of capital that is currently being held back by tax burdens – investors are slow to lock in profits due to the oppressive tax regime.

Japan is bucking the global trend. On the same day – April 10, 2026 – the Hong Kong Monetary Authority (HKMA) issued its first permits to issuers of stablecoins. South Korea passed a basic digital asset law that includes bank reserve requirements. In the U.S., bills GENIUS on steblecoins and CLARITY on digital goods are passing through Congress.

Global harmonization of regulators’ approaches is no longer a hypothetical possibility. Nomura and SBI are among the financial giants that are already preparing to launch spot cryptocurrency ETFs in the Japanese market, sending a clear signal that institutional investors are taking positions before the new framework officially takes effect.

April 2026 may go down in history as the month when cryptocurrencies, at least in the world’s third-largest economy, will no longer be considered an experiment.