Editor’s Note: This story has been updated to include a comment from the Financial Services Agency of Japan.

Japan’s market regulator is preparing to propose a revision to the nation’s tax code, potentially opening the door for domestic cryptocurrency exchange-traded funds, according to a report dated Friday.

Major Crypto Tax Reform On The Cards?

The Financial Services Agency is planning to request a review of the tax treatment of cryptocurrencies, or virtual currency, for the 2026 fiscal year, Nikkei reported.

The proposal, expected by the end of August, includes shifting cryptocurrency gains to a separate tax category with a flat 20% tax rate, similar to regular capital gains taxes. This is a major shift from the current system, where cryptocurrency income is treated as “miscellaneous income” and taxed up to 55%.

See Also: Japan’s Economy Grows Faster Than Expected, China Loses Momentum As Tariff Impact Looms: Nikkei Bounces, US Futures Mixed

Bitcoin, Ethereum Spot ETFs Soon?

Additionally, the FSA is planning a 2026 legislative bill to categorize cryptocurrency as a “financial product” under the Financial Instruments and Exchange Act, rather than a “means of payment” under the Payment Services Act.

Reclassifying cryptocurrency as a financial product could clear the regulatory path for cryptocurrency ETFs, like those tied to Bitcoin (CRYPTO: BTC) and Ethereum (CRYPTO: ETH), in the country.

This proposal comes at a time when Japan is taking significant strides in the cryptocurrency space.

The FSA told Benzinga last week that JPYC Inc., a stablecoin issuing company, has been authorized to issue the first-ever yen-backed stablecoins. The stablecoin is set to be deployed on Ethereum (CRYPTO: ETH), Avalanche (CRYPTO: AVAX) and Polygon (CRYPTO: POL).

Separately, an FSA spokesperson told Benzinga that the deadline for tax revision requests for the next fiscal year is the end of this month and that they will refrain from commenting at this point.

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Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.

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