Japan is on the verge of transforming its crypto landscape. The Financial Services Agency (FSA) has proposed redefining cryptocurrencies as financial products under the Financial Instruments and Exchange Act (FIEA), the same law governing stocks and bonds. If approved, this move would pave the way for crypto exchange-traded funds (ETFs) and introduce a flat 20% tax on crypto income—replacing the current progressive system that reaches up to 55%.

This bold step is part of Japan's "New Capitalism" strategy to boost investment and economic innovation. It positions the country to compete globally by making crypto more attractive to both retail and institutional investors. With over 12 million active crypto accounts and assets totaling ¥5 trillion (about $34 billion), Japan is already one of the most crypto-engaged countries in the world.

The FSA notes that crypto ownership now rivals, and in some cases surpasses, traditional financial products like forex and corporate bonds—especially among younger, tech-savvy investors. The agency also pointed to global trends, with over 1,200 institutions—including U.S. pension funds and Goldman Sachs—invested in spot Bitcoin ETFs.

In a related move, Sumitomo Mitsui Financial Group (SMBC), TIS Inc., Ava Labs, and Fireblocks have signed an agreement to explore stablecoin adoption in Japan. Their plans include issuing stablecoins tied to both the yen and the U.S. dollar and using them to settle tokenized assets like stocks and real estate.

In March, Japan issued its first stablecoin license to SBI VC Trade, a subsidiary of SBI Holdings, which is preparing to support Circle’s USDC.