Japan’s 20% cryptocurrency tax sets a new bar in Asia, putting pressure on Singapore and Hong Kong as retail costs fall.

Japan is quietly preparing the most pro-crypto turn of all the G7 countries.

According to several local media reports, the Financial Services Agency (FSA) is preparing a radical reclassification of digital assets that would bring Bitcoin, Ethereum and around 100 other tokens under the same roof as stocks and investment funds.

If the plan goes ahead, Japan will treat these tokens as “financial products” starting in 2026, leading to a flat 20% tax, rules on insider trading, and institutional pathways that could open doors to banks, insurers, and state-owned companies.

Why is Japan taking this turn now?

For years, crypto in Japan has operated in a regulatory gray area. It has been tolerated, heavily imposed and kept at bay by the country’s most powerful financial institutions.

Under the current system, crypto gains are taxed as miscellaneous income, with marginal rates of up to 55%. Moving to financial product status would reframe crypto as an asset comparable to stocks, rather than a speculative anomaly.

The timing here is deliberate. The FSA appears to be aiming for a submission to the Diet in 2026, giving it a full year to finalize consultations, draft legislation and develop a clear taxonomy.

The agency is learning from past failures (both domestic, like the fallouts of Mt. Gox and Coincheck, and global, like FTX and Terra), and rebuilding the crypto framework with institutional credibility in mind.

The proposed overhaul contains three essential elements.

First, tax parity: cryptocurrency holders of approved tokens would pay a 20% capital gains tax, the same as stock investors. This makes holding Bitcoin or Ethereum more attractive to long-term savers, corporate treasuries and retail traders.

It also removes one of the most tax disincentives for Japanese residents to hold crypto domestically, potentially reversing years of offshore migration.

Second, regulatory recategorization. Tokens like BTC and ETH would be reclassified under the Financial Instruments and Foreign Exchange Act (FIEA), Japan’s primary securities law.

This status triggers a series of requirements, from issuer reporting to crackdowns on insider trading, that signal to banks and brokerage firms that these assets are now within their compliance scopes.

If implemented as noted, these rules could allow certain banks and financial institutions to offer crypto exposure directly to customers through affiliated brokerages or custodians.

Third, and perhaps most structurally important, is the access control function. The FSA is reportedly whitelisting approximately 105 tokens that meet classification standards.

This creates a divided market: within the regulatory perimeter, access to bank-quality custody, equity-like taxation and institutional rails; apart from it, stricter restrictions, limited access to trade and a higher compliance burden.

For investors and token teams, this boundary could become a hard dividing line between what is viable in Japan and what is not.

A region realizes this

If Japan moves forward on this front, it will be light years ahead of its G7 peers in terms of regulatory clarity. But he will not be the only one in Asia. Singapore is already embarking on a new licensing regime that links token deposits and stablecoins to card networks and banking channels.

Hong Kong is testing a tokenized green bond platform through the HKMA and giving banks regulatory leeway to manage digital assets through existing securities licenses. Korea has also launched a progressive framework for crypto adoption among its largest companies, with Samsung and SK exploring tokenized funds issuance and blockchain custody.

Note: ✅ = in place; ⚠️ = partial or in progress; ❌ = absent. Based on public disclosures, 2025.

What sets Japan apart is that it ties everything to its domestic tax and disclosure rules. While Singapore and Hong Kong focus more on custodial, listing and payment infrastructure, Japan is tackling one of the most critical levers: after-tax returns.

If Japanese retail traders go from 55% to 20% on crypto gains, this could significantly change behavior. If banks and insurance groups are allowed to offer crypto-related products under existing investment frameworks, this will pave the way for institutional allocation that other G7 countries have not unlocked.

The effect on capital flows across Asia could be rapid. Japanese exchanges could see higher net deposits as users bring back assets from offshore wallets. If local ETF providers get the green light to offer Bitcoin and Ethereum vehicles, capital that previously went to spot ETFs in the United States could be repatriated.

Institutional treasures that eschewed crypto entirely under the old regime could begin to enter at the margins, especially if accounting rules and custody infrastructure follow.

Source: CryptoSlate modeling for crypto fund inflows into Japan, based on reforms proposed by the Japanese FSA. Scenario ranges reflect the scope of ETF approval and speed of institutional adoption.

It also increases pressure on regional competitors. Singapore has long touted itself as a crypto hub, but it taxes capital gains only because it does not formally recognize them on a personal level. Hong Kong is still regaining confidence after the JPEX scandal and faces political constraints.

Korea is watching closely; its cryptocurrency tax regime for 2025 could be revised if the Japanese model proves more effective. And the United States is far from reaching consensus on how to treat digital assets under securities law or the tax code, despite efforts in the House and Senate.

Source: National Tax Guidelines, Local Crypto Frameworks (2025). A classification for Japan is proposed for 2026.

What this means for BTC, ETH and SOL

The near-term impact for Bitcoin, Ethereum and Solana depends on execution. The FSA has not yet released any draft legislation and no official list of the 105 tokens has been made public. The political calendar could delay progress, or the list of assets could be smaller than expected.

But structurally, the direction is clear: Bitcoin and Ethereum fall within the same legal and tax frameworks as traditional financial instruments.

If the rules come into force in 2026, it would coincide with the likely second full year of US spot ETF flows, the maturation of the EU MiCA framework and the rollout of stablecoin legislation in the UK. This convergence could produce the clearest regulatory environment crypto has ever seen in major developed markets.

But it’s important to note that crypto in Japan is not being scaled back, but rather normalized through rules. For institutions, this is the safest path. For retail, the tax shift changes incentives.

And for Asia, it means one of the world’s largest pools of capital is setting a standard that others will likely be forced to follow. The next two years will define where, how and under what rules capital will flow when it does.