Woofun AI reports that Satsuki Katayama, Japan’s Minister of Finance, announced a formal review to permit cryptocurrency exchange-traded funds (ETFs) during the ‘Open Quick 2026’ seminar on July 10. The proposal seeks to amend the Financial Instruments and Exchange Act, fundamentally altering the regulatory status of digital assets in the country.

Structurally, the plan involves reclassifying virtual assets as financial products, bringing them under the same oversight framework as traditional securities. This amendment aims to resolve the fragmented regulatory framework that has previously hindered clarity, offering clearer legal protections for investors and paving the way for deeper institutional participation in the market.

Market preparation is already underway among major securities firms, with SBI Securities and Rakuten Securities reportedly preparing to list crypto ETFs once the legal amendments are finalized. These regulated, exchange-traded instruments would allow investors to gain exposure to digital assets, potentially broadening the investor base beyond the current retail-heavy market structure.

A more critical variable is the proposed tax reform, which addresses the current classification of crypto trading profits as miscellaneous income subject to progressive tax rates reaching 55% for high earners. The new policy would implement a flat 20% separate tax, aligning crypto gains with the rate applied to stock trading profits and significantly reducing the fiscal burden on traders.

Woofun AI data shows that this reduction could substantially increase net returns, stimulating higher trading volumes and encouraging long-term holding by removing the disincentive that has driven some investors to seek favorable tax regimes abroad. By correcting the mismatch between regulatory acceptance and harsh fiscal policy, the proposal positions Japan as a more competitive hub for digital asset innovation.

Globally, Japan’s move may serve as a bellwether for other Asian economies, including South Korea and Singapore, to revisit their own crypto tax and ETF policies. The integration of crypto ETFs into established securities infrastructure signals a maturation of the asset class, moving it closer to mainstream financial products and reinforcing its legitimacy.

The finance ministry is advancing this comprehensive reform to legalize cryptocurrency ETFs and slash the tax rate to 20%, aiming to modernize the regulatory landscape and attract significant capital inflows. Parliamentary approval remains the final hurdle, making the coming months critical for determining whether these changes will be enacted.