Here is the rewritten article content in HTML format:
Tokyo, [Date]
Japan Proposes Sweeping Crypto Reclassification: ETF Pathway and Flat Income Tax
The Japanese Financial Services Agency (FSA) has proposed a significant reclassification of cryptocurrencies, aiming to clear a regulatory path for crypto exchange-traded funds (ETFs) and introducing a flat 20% tax on digital asset income.
Announced Tuesday, Financial Instruments and Exchange Act (FIEA) recognition treats crypto under the same regulatory framework as securities and traditional financial products.
Furthermore, the proposal suggests replacing Japan’s existing progressive tax regime, which taxed crypto gains up to 55%, with a uniform 20% flat income tax rate, similar to stocks. This potential change aims to enhance the investment appeal of cryptocurrencies for both retail and institutional investors.
The proposal aligns with the Japanese government’s broader “New Capitalism” strategy, seeking to bolster the nation’s economy through investment leadership.
Surge in Domestic Crypto Activity
The push comes amidst rapidly growing interest in cryptocurrencies as a mainstream investment asset. The FSA reported that over 12 million active domestic crypto accounts existed as of January 2025, with platform-held assets surpassing 5 trillion Japanese yen ($34 billion).
Crypto ownership has surpassed participation in certain traditional asset classes, such as FX and corporate bonds, particularly among tech-savvy retail investors.
Responding to the global surge in institutional adoption highlighted by the proposal is the fact that over 1,200 financial institutions worldwide, including US pension funds and Goldman Sachs, now manage holdings in US-listed spot Bitcoin ETFs.
Japanese regulators aim to foster similar domestic growth, leveraging the momentum of expanding global fund flows into cryptocurrencies.
Stablecoin Developments Signal Broader Regulatory Focus
In related developments, Japanese financial institutions are actively exploring stablecoin commercialization. In April, Sumitomo Mitsui Financial Group (SMBC), TIS Inc., Ava Labs, and Fireblocks signed an MoU to develop stablecoins pegged to the US dollar and Japanese yen.
The initiative also explores using stablecoins for settling tokenized real-world assets like stocks, bonds, and real estate.
In March, Japan awarded its first stablecoin license to SBI VC Trade, enabling them to support Circle’s USDC stablecoin.
Market Implications and Further Reading
Related: What Japan’s fiscal debt crisis means for global crypto markets
Related: Bank of Japan pivot to QE may fuel Bitcoin rally — Arthur Hayes
Related: Bitcoin’s invisible tug-of-war between suits and cypherpunks
Note: You will need to replace [Journalist Name], [Date], [Image Source URL], and the [Link URL] placeholders with appropriate values for your publication.
