Japan plans major crypto overhaul with flat 20% tax, pathway to ETFs

Key Takeaways

Japan and the United States are advancing crypto regulations, with Japan overhauling taxes and ETFs while the U.S sees key IRS leadership changes amid stablecoin legislation.

Japan is now taking a major step towards embracing mainstream cryptocurrencies.

The Financial Services Agency (FSA) is preparing a sweeping reform package that will combine tax revisions with regulatory upgrades, potentially opening the door to crypto-linked exchange-traded funds (ETFs).

Under the proposed changes, authorities will tax digital assets like equities and classify them as financial products. This will enable the FSA to enforce insider-trading rules, disclosure requirements, and investor protections under the Financial Instruments and Exchange Act.

Japan’s crypto reforms

Right now, crypto gains are taxed as “miscellaneous income,” with progressive rates that can exceed 50% including local levies, while equities and bonds face a flat 20% tax.

The FSA plans to review the tax treatment for the 2026 fiscal year, proposing a separate 20% flat tax for crypto gains and a three-year loss carry-forward.

Additionally, the FSA aims to reclassify digital assets under the Financial Instruments and Exchange Act, rather than the Payment Services Act. This would allow it to enforce investor protections, disclosure standards, and insider-trading rules, while also opening the door for domestic cryptocurrency ETFs.

All this is evidence that Japan is pushing to integrate cryptocurrencies into mainstream finance through proposed tax reforms and regulatory updates.

Although regulators have delayed the launch of the country’s first crypto ETF, they are carefully weighing risks such as price divergence, market manipulation, tax complexities, limited retail participation, and custodial security.

Leadership changes

Across the Pacific, Trish Turner, Head of the IRS’s Digital Assets Unit, announced that she is leaving to become tax director at Crypto Tax Girl, a firm specializing in cryptocurrency tax services. She joined the IRS after her predecessors, Sulolit “Raj” Mukherjee and Seth Wilks, departed earlier this year.

Her exit follows major leadership changes in the IRS, with five executives placed on administrative leave and Chief Billy Long removed. As it stands, Treasury Secretary Scott Bessent is serving as acting commissioner.

Turner’s departure coincided with President Trump signing the first federal legislation regulating stablecoins, a move that advocates say could accelerate mainstream adoption of digital assets.

Her exit is also a sign of the regulatory challenge of balancing innovation with oversight in the rapidly evolving crypto sector.