Japan’s Shift in Crypto Policy and What It Means for Investors

Japans ruling Liberal Democratic Party (LDP) is moving forward with regulatory changes to update how cryptocurrency is taxed and classified. The proposed reforms aim to lower the capital gains tax on digital assets to 20% and officially recognise cryptocurrencies as a separate asset class within financial regulations.

Under the proposed framework, cryptocurrencies will no longer be treated as securities under Japan‘s Financial Instruments and Exchange Act. The plan also includes changes to tax policies, bringing crypto derivatives in line with spot investments and delaying taxation on crypto-to-crypto swaps. Taxes will only be applied when digital assets are converted into fiat currency. These changes reflect a shift in Japan’s approach to digital assets as part of broader financial policy updates.

Japan is making these changes while reducing its reliance on U.S. debt securities and exploring new investment strategies. The government has traditionally been cautious in regulating cryptocurrency, aiming to encourage innovation while ensuring investor protection. The LDP is currently seeking public feedback on the proposed reforms, with a final deadline set for March 31, 2025, as part of commitments made in a 2024 economic stimulus package.

Alongside these reforms, policymakers are discussing Japan‘s long-term approach to Bitcoin. One proposal suggests adding Bitcoin to Japan’s foreign currency reserves to strengthen its global position. However, Prime Minister Shigeru Ishiba has raised concerns, pointing to a lack of clarity regarding U.S. policies on Bitcoin as a reason to proceed carefully.

Despite easing tax rules, Japan‘s regulatory authorities continue to enforce strict oversight in other areas. In February 2025, the Financial Services Agency (FSA) ordered Google and Apple to block unlicensed cryptocurrency exchange apps until they comply with local regulations. The directive targeted platforms such as Bybit, MEXC Global, LBank Exchange, KuCoin, and Bitget, which were found to be operating without proper authorisation under Japan’s Payment Services Act.

Following the FSAs request, Apple reportedly removed the affected apps from its Japanese App Store after repeated warnings. Google, however, had not yet taken action at the time, according to reports from Nikkei. These restrictions only apply to new downloads, meaning users who had already installed the apps can continue to use them.

Japan has issued similar warnings to unregistered crypto exchanges since 2018. Despite regulatory efforts, many unlicensed platforms continue to serve Japanese users by operating across borders.

As one of the most strictly regulated cryptocurrency markets in the Asia-Pacific region, Japan is continuously refining its policies to balance financial innovation with compliance. The FSA has urged financial institutions to improve monitoring to prevent unauthorised fund transfers to crypto exchanges, reinforcing its commitment to upholding the Payment Services Act.