Japan Approves Crypto Law; 20% Tax May Start in 2027 or 2028

On July 15, Japan’s House of Councillors approved Cabinet Bill 57, transferring regulated cryptocurrency activity from the Payment Services Act into the Financial Instruments and Exchange Act (FIEA). The core FIEA provisions must be brought into force by a Cabinet order within one year of promulgation. If the Cabinet enforces the rules during 2026, the new tax and compliance rules would take effect for the tax year beginning Jan. 1, 2027. If enforcement occurs during 2027, the changes would begin on Jan. 1, 2028. The fiscal 2026 tax changes were enacted as Law No. 12 on March 31 and remain dormant until the FIEA trigger is set.

When activated, qualifying crypto gains will be subject to a combined 20% rate: 15% national income tax and 5% local inhabitant tax. That preferential rate applies only when investors sell eligible tokens through registered crypto businesses and the assets appear on Japan’s official register. Transactions, tokens or trading venues outside that defined channel will keep their current tax treatment. Unused losses within the same tax-defined crypto category can be carried forward for three years under specified conditions.

Reporting obligations for registered crypto firms will follow the tax changes by one year. Under the Ministry of Finance framework, firms must provide tax authorities with customer identities, the government My Number identifier and transaction details by Jan. 31 after the trade year. For example, if the 20% regime is first applied for the 2028 tax year, reporting would cover trades executed in 2029 and the first reports would be due Jan. 31, 2030.

Regulatory duties shift as well. The government maintains crypto will remain legally distinct from securities, but activities covered by the FIEA provisions will face disclosure, registration and compliance requirements similar to securities markets. Financial Services Agency materials set out expanded obligations for crypto sales, issuer-controlled token offerings, borrowing arrangements, asset screening, custody, customer protections and insider trading controls.

Exchanges and intermediaries can begin preparing for the new framework, but formal duties will apply only after the FIEA provisions commence and after the Cabinet and the FSA issue detailed operating rules. Many operational details and product approvals are left to subsequent Cabinet orders and FSA ordinances.

The legislation brings crypto investment management and advisory services into FIEA’s scope and contemplates certain investment trusts holding tax-qualifying, registered crypto assets. That treatment requires a separate amendment to the enforcement order for the Investment Trusts Act. The law does not name any spot Bitcoin exchange-traded fund or approve specific products. Sponsors will need to clear product and listing reviews once implementing rules define the new route.

Implementation now depends on three steps: formal enactment and promulgation of measures already passed by the Diet, the Cabinet’s decision on when to bring the FIEA changes into force, and completion of the FSA’s detailed rules and ordinances. After those steps are completed, the 20% tax rate and the new compliance duties will apply from the following tax year.