Japan is advancing legislation that would reclassify cryptocurrencies as financial instruments, a shift that could cut taxes and clear the way for spot Bitcoin exchange-traded funds.

Under a revision to the Financial Instruments and Exchange Act, digital assets would be treated as financial instruments rather than a separate, lightly regulated class. A related bill has cleared a key Upper House committee, advancing one of the most ambitious crypto frameworks among the Group of Seven.

The change is expected to pave the way for a flat 20% tax on crypto gains, replacing higher, variable rates that have discouraged domestic investment. Officials have also signaled that a spot Bitcoin ETF could list on the Tokyo Stock Exchange, possibly by 2027.

Government backing has been conspicuous. The WebX 2026 conference in Tokyo this week featured a video address from the prime minister and appearances by the finance and economy ministers, who stressed Web3 integration and support for startups.

The posture contrasts with wariness elsewhere. India has leaned toward restricting stablecoins, while European rules under MiCA and U.S. scrutiny have prompted delistings of privacy-focused coins. Japan is betting that clear rules will attract capital and talent.

If enacted, the framework would deepen institutional participation and accelerate trends such as stablecoins as "internet dollars" and the tokenization of real-world assets. For Tokyo, the goal is to convert a cautious regulatory past into leadership in the next phase of digital finance.

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