Japan is rethinking its approach to cryptocurrency regulation, with plans to reclassify cryptocurrencies as financial products. This shift is in line with proposals to implement insider trading restrictions similar to those in traditional financial markets. The Financial Services Agency (FSA) is preparing to submit legislation to parliament as early as 2026, following consultations with industry experts. The proposed changes include revisions to the Financial Instruments and Exchange Act, which would differentiate digital assets from securities while recognizing their investment qualities. Current taxation on crypto investments in Japan is steep, reaching up to 55%, compared to 20% for capital gains on traditional financial products like ETFs. Such reforms, along with improved safety measures, could encourage more institutional investments in cryptocurrency, as Japan seeks to adapt its regulatory framework to the evolving crypto landscape.

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