Japan’s parliament has officially approved legislation moving crypto regulation under the Financial Instruments and Exchange Act (FIEA), paving the way for a 20% separate tax treatment on eligible crypto gains once the law takes effect.

The bill cleared the Upper House, the House of Councillors, on July 15 after passing the House of Representatives and the Finance and Banking Committee last month, winning final approval in Japan’s National Diet.

The reforms transfer oversight of crypto trading from the Payment Services Act to the FIEA, with the Financial Services Agency treating crypto assets as financial products distinct from traditional securities.

The legislation establishes new business regulations for crypto trading, disclosure obligations for issuer-backed crypto assets, and exchange-level disclosures for decentralized assets such as Bitcoin.

It also subjects crypto investment management and advisory businesses to financial regulations and imposes insider trading rules that prohibit trading, tipping, or recommending transactions based on undisclosed material information involving crypto assets traded on domestic platforms.

A key provision of Japan’s planned crypto reforms is that qualifying crypto gains could soon be taxed at 20% instead of the current maximum rate of 55%. This will comprise 15% national income tax and 5% local inhabitant tax, together with a three-year loss carryforward under specified conditions.

The changes are expected to improve tax efficiency for investors and could support greater investment in Tokyo’s real estate market.

The tax changes are expected to apply from January 1 of the year after the amended law takes effect; current projections point to January 1, 2028.