Japan’s crypto reform bill: What does it mean for Japanese crypto users?

The Japanese government is taking a bold step toward modernizing its approach to digital assets with its proposed crypto reform bill. This new legislation aims to amend the Payment Services Act in order to create a more comprehensive and effective regulatory framework for cryptocurrencies. By embracing these changes, Japan seeks to boost investor confidence and pave the way for innovative crypto services. 

In this article, we’ll explore the progress of the bill, its key provisions and the potential impacts on traders, brokerages and stablecoin issuers in Japan.

Key Takeaways:

• Japan’s Cabinet has approved a major amendment to the Payment Services Act, with the bill heading to the National Diet for review.

• The bill proposes significant changes, including lower capital gains tax on crypto and potential crypto ETF creation, which could benefit traders and investors.

• These reforms could reshape the operations of crypto brokerages and stablecoin issuers, reinforcing Japan’s commitment to fostering a crypto-friendly environment.

Crypto reform bill progress

The Cabinet of Japan recently approved a proposal to amend the Payment Services Act, signaling a major shift in the way that cryptocurrencies are regulated in the country. This proposal is set to provide a more robust framework for digital assets by addressing gaps in existing regulations. 

Now, the bill is heading to the National Diet, Japan’s legislative body, where lawmakers will review and debate its provisions. The reform is widely viewed as a step toward creating a safer and more transparent crypto market, which could increase both domestic and international investor confidence.

Key provisions and regulatory changes

The proposed crypto reform bill introduces several key changes. 

First, it seeks to broaden the scope of digital asset regulation, encompassing not only cryptocurrencies but also stablecoins and crypto brokerages. This move is expected to provide clearer guidelines for industry players, reducing regulatory ambiguities that have long plagued the sector. One of the most significant provisions is the potential creation of crypto exchange-traded funds (ETFs), which would open new avenues for both investment and liquidity. 

Additionally, the bill proposes reducing the capital gains tax on cryptocurrency transactions from 55% to 20%, a dramatic change that could lower barriers for individual investors and spur broader market participation. 

Other provisions aim to strengthen anti-money laundering (AML) and know your customer (KYC) standards, further enhancing market integrity. These regulatory changes are designed to make Japan a more crypto-friendly jurisdiction, aligning it with global best practices while addressing domestic concerns.

Potential changes to Japan's crypto regulations

The reform bill is set to significantly reshape Japan's crypto landscape. For traders and investors, one of the most notable changes would be the reduction of the capital gains tax from 55% to 20%, which could greatly increase the appeal of crypto investments. Moreover, the potential introduction of crypto ETFs in Japan would further diversify investment options and bring additional liquidity to the crypto market.

These changes aren’t just about tax and trading — they’re designed to foster a more dynamic and inclusive crypto ecosystem in Japan. Lower tax rates, clearer regulatory guidelines and new financial instruments are likely to attract a broader investor base. This is especially important for a country where a significant portion of the population remains cautious about engaging in digital asset trading, due to historical regulatory uncertainties.

What would this mean for crypto brokerages in Japan?

For crypto brokerages, the proposed reforms are both a challenge and an opportunity. On the one hand, stricter regulatory requirements will demand robust compliance measures and may increase operational costs. 

On the other, a more predictable regulatory environment will build trust among users and institutional investors. Brokerages that can quickly adapt to these changes will be better positioned to capture market share in a more mature and secure crypto market. 

For instance, SBI VC Trade, a crypto exchange and subsidiary of SBI Holdings, recently received the first license in Japan to operate as an Electronic Payment Instruments Exchange Service Provider. This allows them to deal with foreign-issued stablecoins, starting with Circle’s USD Coin (USDC).

Enhanced regulations could also drive innovation, as firms develop new products and services that comply with, and even leverage, the updated framework.

What will this mean for stablecoin issuers in Japan?

Stablecoin issuers in Japan are also likely to be impacted by the new reforms. 

The bill’s broader regulatory scope will bring more clarity and oversight to stablecoin operations, ensuring that issuers maintain adequate reserves and adhere to strict standards of transparency. This could enhance user confidence and promote wider adoption of stablecoins as reliable digital assets. 

However, issuers will need to invest in compliance infrastructure and adapt to new reporting requirements — which may initially be challenging, but will ultimately benefit Japan’s crypto ecosystem through increased trust and stability.

Will this drive crypto innovation in Japan?

Japan’s proposed crypto reform bill represents a pivotal moment for the nation’s digital asset market. By addressing key regulatory gaps and introducing transformative changes — such as lower capital gains tax and potential crypto ETFs — the bill aims to bolster investor confidence and drive innovation. 

These reforms will have a profound impact on traders, crypto brokerages and stablecoin issuers alike, paving the way for Japan to join the global wave of crypto adoption. As the National Diet deliberates the final details of the bill, market participants and industry leaders will be watching closely, anticipating a more robust and inclusive crypto ecosystem in Japan.

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