Japan’s FY2026 Tax Reform Reclassifies Cryptocurrencies as Financial Products
Japan's Liberal Democratic Party and the Japan Innovation Party have unveiled a landmark tax reform plan for 2026 that repositions cryptocurrencies alongside traditional financial instruments. The overhaul shifts digital assets from their current classification as 'miscellaneous financial instruments' to regulated financial products—a MOVE designed to encourage long-term wealth creation over speculative trading.
The reform introduces a tiered taxation system for crypto transactions, mirroring existing structures for securities. Spot trading, derivatives, and cryptocurrency ETFs will each face distinct tax treatments under a proposed 20% flat rate—aligning with current capital gains taxes on stocks. Notably, the plan allows investors to carry forward crypto trading losses for three years to offset future gains.
This regulatory pivot follows growing institutional adoption of digital assets in Japan, where exchanges like bitFlyer and Liquid have operated under strict licensing regimes since 2017. The changes may accelerate institutional participation while providing retail investors clearer tax frameworks—a contrast to the punitive short-term trading taxes previously levied.
