Japan passes bill to regulate crypto as financial products, sets 20% tax

A bill that defines cryptocurrency as a financial product passed Japan's House of Councillors on July 15, officially becoming law, CoinPost reported. Under the amendment, which shifts the legal basis for crypto regulation from the Payment Services Act to the Financial Instruments and Exchange Act, the Japanese government will apply a separate tax of approximately 20% to all crypto assets handled by operators. The new rules will also allow investors to deduct losses from profits for up to three years. Penalties for the unregistered sale of cryptocurrencies will be increased, with the maximum prison sentence rising from three to 10 years and the maximum fine increasing from 3 million yen to 10 million yen. Insider trading regulations will also be introduced for the first time, and certain crypto issuers will be required to make regular annual disclosures. The tax changes are scheduled to take effect on Jan. 1, 2028, if the law is implemented in fiscal year 2027. While the amendment establishes a regulatory framework for crypto ETFs, the approval of a Bitcoin ETF is not yet confirmed. Detailed standards regarding reserve levels, derivatives leverage, and requirements for custody and AML/CFT operators will be finalized in subsequent enforcement orders and supervisory guidelines. The bill had previously passed the House of Representatives in June.