Japan plans to change crypto classification

Japan’s top financial regulator, the Financial Services Agency (FSA), has announced plans to redefine cryptocurrency assets like Bitcoin as ‘financial assets‘ in its tax reform proposals for fiscal year 2025. It would shift crypto from its current classification as “payment instruments” to something more in line with traditional investments. The change aims to give cryptoassets more legitimacy and could encourage greater public investment.

While the FSA did not directly call for tax reform, it suggested the possibility of revising Japan’s controversial crypto tax rules. It follows similar calls from the ruling Liberal Democratic Party (LDP), which has advocated for regulations that offer investor protection comparable to those for stocks. The LDP also wants to move away from the current crypto tax system, which subjects traders to high income tax rates, in favour of a capital gains tax.

Despite some differences in approach, such as the FSA favouring a broader income tax integration, both the FSA and LDP agree on the need to update the legal classification of crypto. The shift comes at a time when companies in Japan are increasing their investments in Bitcoin, signalling growing interest in the evolving regulatory landscape.