Japanese Regulator Proposes Reclassifying Crypto as Financial Assets

The classification of cryptocurrencies in Japan may undergo a significant shift after the nation’s primary financial regulator announced plans to view tokens like Bitcoin (BTC) as “financial assets.”

According to the Japanese news outlet CoinPost and an official document from the Financial Services Agency (FSA), the regulator outlined its position in its tax reform requests for the fiscal year 2025.

Is Crypto Classification Set to Change in Japan?

The FSA stated that it intends to begin treating crypto assets as “financial assets” that “the general public can invest in.”

Trading volumes on Japan’s bitFlyer crypto exchange over the past 12 months. (Source: CoinGecko)

Currently, Japanese law classifies crypto assets as “payment instruments” under the terms of the Payment Services Act.

The shift to a more “investment”-focused definition would signify a form of legitimization for crypto.

However, such a change would likely depend on the stability of the crypto market.

While the document does not explicitly call for crypto tax reform, CoinPost noted that it suggests “a possibility” that Japan’s controversial crypto tax rules “will be reviewed.”

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Is the Ruling Party on the Same Page?

This move comes days after the ruling Liberal Democratic Party (LDP) made similar claims in its own tax policy suggestions for FY2025.

The LDP wants the crypto market to include “rules on accountability and investor protection” that are “equal to those in place for stock investment in listed corporations.”

This would allow the law to begin viewing “certain crypto assets” as “financial products” commonly used in “the general public’s portfolios.”

CoinPost wrote that the tone of the FSA’s document indicates it is “endorsing [the LDP’s]” stance.

The FSA, as media outlets reported this year, is preparing a “basic review” of how it regulates crypto.

Nevertheless, the FSA’s move suggests it believes the Payment Services Act offers inadequate protection to crypto investors.

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Differing Views on Tax Reform

There is another wrinkle for Japanese crypto traders. While the LDP appears eager to scrap Japan’s current crypto tax system, the FSA seems to have different ideas.

Under the current system, crypto traders must declare their earnings as “other income” on annual tax declarations.

This means high earners can pay up to 55% tax on their earnings. The LDP favors abolishing this method in favor of a capital gains tax on crypto earnings.

The FSA, however, appears instead eager to place crypto “within a more comprehensive framework of revenue tax integration,” CoinPost explained.

There does, however, appear to be a consensus about the need to change the legal classification of crypto in Japan.

This is particularly relevant as Japanese corporations like Metaplanet and Remixpoint begin to ramp up their Bitcoin-buying strategies.

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Earlier this year, the LDP’s Deputy Secretary-General Masanobu Ogura claimed that the current regulatory framework was insufficient.

Ogura stated that crypto assets are no longer just “a method of payment,” but also “an investment vehicle and a source of innovation.”

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