Japan's Upper House committee approved legislation on July 15 that would legalize Bitcoin exchange-traded funds and establish a flat 20 percent tax rate on crypto gains, clearing a procedural hurdle toward potential Tokyo Stock Exchange listings by late 2027.
The bill reclassifies crypto assets as financial instruments under the Financial Instruments and Exchange Act, a shift that would bring digital assets into Japan's existing regulatory framework for securities and derivatives. The 20 percent tax rate takes effect in fiscal 2028, replacing Japan's current system of taxing crypto gains as miscellaneous income at rates as high as 55 percent for high earners.
The Upper House committee action moves the measure forward but does not constitute final passage. The bill still requires a full Upper House vote and, if approved there, would then advance to the Lower House. Japan's Financial Services Agency would need to complete secondary rulemaking before any Bitcoin ETF could list on the Tokyo Stock Exchange, a process expected to extend into 2028.
The reclassification under the FIEA would place crypto assets alongside stocks and bonds in Japan's regulatory structure, ending their treatment as a distinct asset class. The measure also targets fiscal 2027 for full implementation of the asset reclassification, according to earlier legislative drafts.
Japan has been slower than the United States and some Asian peers to approve spot Bitcoin ETFs. The U.S. Securities and Exchange Commission approved the first U.S. spot Bitcoin ETF in January 2024. South Korea's financial regulator began accepting applications for spot Bitcoin ETF products in 2023.
The bill faced scrutiny from consumer protection groups concerned that lower tax rates and regulatory clarity could drive retail participation in volatile assets. Supporters argued that competitive tax treatment and institutional-grade custody standards would attract asset managers to list Bitcoin products in Japan rather than overseas exchanges.
