The economics of Japan’s crypto transition and tax reform

FIEA and the tax change

The 2026 tax reform moves crypto asset profits from a 55% maximum miscellaneous income rate to a 20.315% separate taxation rate. This change applies to specified crypto assets handled by businesses registered under the amended Financial Instruments and Exchange Act. You likely know the 55% rate is a deterrent, but I find the 20.315% rate, which consists of 15% national and 5% local inhabitant tax, the only reason large-scale investors stay in the Japanese market. The reform also introduces new R&D tax credits for strategic technologies like AI, offering up to 50% of expenses to attract investment. These changes depend on the regulatory shift from the Payment Services Act to the Financial Instruments and Exchange Act, which the government expects to reach full operational effect in fiscal 2027. The regulatory shift moves crypto from the Payment Services Act to the Financial Instruments and Exchange Act, which will subject trading platforms to stricter business conduct and oversight by the Securities and Exchange Surveillance Commission starting in fiscal 2027. Unlicensed operators now face a maximum prison term of ten years and a 10 million yen fine. This applies to investors who earn more than 200,000 JPY in profits. The reform also permits a three-year loss carryforward for qualifying crypto gains.

Stablecoin rivalry

Stablecoin competition defines the market. Sony Bank aims to launch a dollar-denominated stablecoin through Connectia Trust by 2027, using Bastion for reserve management and issuance. The bank intends to use the token for payments across PlayStation and the Crunchyroll anime service to reduce credit card fees. The Independent Community Bankers of America opposes this, arguing that Connectia could allow Sony to bypass the rules that bind ordinary banks.

GMO-Z.com Trust Company provides GYEN and ZUSD on the Stellar network, though regulatory restrictions prevent Japanese residents from using them. These assets require monthly attestation reports from certified public accountants to verify fiat reserves. SBI Group launched JPYSC in June 2026 via SBI Shinsei Trust Bank. Megabanks like MUFG, SMBC, and Mizuho plan to begin commercial transactions with a shared yen-pegged stablecoin on the Progmat platform by March 2027. Can these established institutions win the race against agile fintech firms?

Infrastructure and settlement

Infrastructure providers build the rails for these assets. SBI Holdings uses XRP to facilitate remittances to bank accounts in the Philippines, Vietnam, and Indonesia. SBI Remit works with Tranglo to ensure recipients receive local currency. This XRP-based bridge currency allows for settlements in 3 to 5 seconds. MoneyTap, a mobile application powered by RippleNet, allows regional banks like Yamaguchi Bank, Kitakyushu Bank, and Momiji Bank to facilitate peer-to-peer transfers.

The Financial Services Agency requires that registered exchanges hold at least 95% of customer assets in cold storage. This rule ensures that only 5% of funds stay in hot wallets for operational needs. The Japanese subsidiary of FTX demonstrated this model by keeping 100% of customer fiat in local trust banks and all customer crypto in secure offline cold wallets. Metaplanet also entered the market by acquiring Siiibo Securities in June 2026 to provide digital securities and Bitcoin-related products. The amount of total holdings for Metaplanet reached 639.5 BTC, worth approximately $40.5 million, following its recent acquisition. The 2026 reform also allows corporations to claim immediate depreciation for qualifying assets to boost productivity.