Japan's revised Financial Instruments and Exchange Act, passed by the House of Councillors on July 15, will shift cryptocurrency regulation from the Payment Services Act to the Financial Instruments and Exchange Act, with a key tax change: from the 2028 tax year, certain crypto transactions via registered domestic exchanges will be taxed at a flat 20% as separate self-assessment income, instead of the current progressive rates that can reach 55%.
Who gets the 20% rate — and who does not
The 20% separate taxation applies only to transactions of specific crypto assets conducted through registered domestic crypto asset exchange service providers. Financial Services Agency (FSA) official Toshitake Inoue explained during a July 14 committee meeting that the rationale is the enhanced investor protection under the new law and the obligation for exchanges to report transaction details to tax authorities. Investors using unregistered or foreign exchanges, including decentralized exchanges (DEXs), will remain subject to progressive taxation on crypto gains.
Committee members questioned whether allowing unregistered platforms to facilitate trades effectively creates a loophole. The FSA responded that it will assess on a case-by-case basis whether an entity is repeatedly and systematically engaging in sales, exchange, or brokerage activities. The result is a clear divide: those who trade through registered domestic exchanges enjoy both the 20% tax rate and stronger legal protections, while others face higher taxes and less regulatory coverage.
Meme coins on overseas DEXs remain outside the rules
A specific topic of debate was meme coin trading on overseas DEXs. Lawmakers cited a typical scenario where a user buys SOL on a domestic exchange, transfers it to a personal wallet, and swaps it for a meme coin on a Solana-based DEX. Since the domestic exchange neither lists nor sells that token, the entire transaction occurs outside Japan's regulatory perimeter.
Finance Minister Katsunobu Kato stated that DEXs lack a centralized administrator, making it difficult to identify and regulate them. The Financial System Council's working group report noted that global regulatory frameworks for DEXs are still under development. Japan will continue to monitor international trends and consider measures, but for now, such trades fall outside the new law's scope.
Where does 'pumping' posts become illegal?
The FSA also clarified rules around social media information dissemination. Inoue stated that simply posting information about crypto assets to an unspecified audience does not automatically constitute solicitation. The key is whether the post is aimed at specific fundraising. Posts like "it's going up" or "buy now" could be considered if they strongly suggest a purchase recommendation. If the poster holds the token and stands to profit from a price increase, it may trigger unfair trading regulations. Detailed guidelines are expected from the FSA in the future.
Protected vs. unprotected trades
The revised law strengthens protections for transactions via registered domestic exchanges, including mandatory information disclosure by issuers and exchanges, civil liability and administrative fines for false statements, insider trading and other unfair trading rules, and regulations on investment advisory and management services. Penalties for unregistered operators have been increased, and courts can now issue emergency injunctions.
The FSA received 1,466 crypto-related consultations between January and March 2026 alone, most involving fraudulent solicitation. The agency believes the majority of these cases will now be subject to legal violations or enhanced enforcement under the new law. Non-fungible tokens (NFTs) remain outside the scope, and stablecoins continue to be regulated under the Payment Services Act as electronic payment instruments.
The Diet also adopted a supplementary resolution calling for the government to publicize the existence of unregulated crypto transactions and to review the law within five years of enforcement, without waiting for the full period. The reform effectively splits the Japanese crypto market into two: a regulated, tax-advantaged "inside" and a self-responsibility, higher-tax "outside." Investors must now understand which side their trades fall on, as the tax benefit may drive capital back to domestic exchanges, but on-chain frontier activities remain outside the system.