Japan Moves to Reclassify Bitcoin and Ether Under Financial Instruments Law

Japan's House of Representatives on June 10 advanced legislation that would reclassify crypto assets as financial instruments, a step that could bring the sector more squarely under capital-markets regulation. The bill cleared the Finance and Financial Affairs Committee and now heads to the House of Councillors for a vote. Submitted by the cabinet in April, it is expected to take effect next year if approved by the upper house. If enacted, the rules governing cryptoasset transactions would shift from the Payment Services Act to the Financial Instruments and Exchange Act, with oversight centered on Japan's Financial Services Agency. The proposal also opens the door to a tax overhaul. Capital gains tax on Bitcoin and Ethereum could fall from a current top rate of 55% to a flat 20%, with the tax change expected to take effect in 2028. Why it matters: Moving crypto into a capital-markets framework could expand regulated access in Japan if lawmakers complete the process. Market sentiment: Cautiously bullish, driven by regulation. Investors are watching whether the upper house approves the reclassification. Regulatory context: The EU's Markets in Crypto-Assets (MiCA) regime provides a close parallel. The Council of the EU adopted MiCA on May 16, 2023, establishing a unified framework for cryptoasset issuers and service providers across the bloc. Japan's bill, by contrast, still requires upper house approval and includes a potential tax change tied to how crypto investing is treated. Potential ripple effects: A reclassification would likely raise compliance expectations and influence product availability. Exchanges and issuers may need tighter disclosure controls before launching expanded offerings. With approval, domestic platforms could accelerate compliance build-outs and regulated product planning. If the process stalls, the impact may remain largely expectation-based. Opportunities and risks: - Opportunities: Upper house approval could signal a path toward regulated product development for Japan-linked crypto exposure. As the 20% tax trajectory becomes clearer, investors may reassess whether domestic demand conditions improve. - Risks: Delays or narrower implementation could deflate Japan-specific regulatory optimism. Higher compliance burdens for exchanges could also slow rollout, making it prudent to wait for venue readiness to reduce execution risk.