Japan's parliament passed a landmark bill formally reclassifying cryptocurrencies as financial instruments, shifting them from a payment-tool framework to an investment category alongside stocks and bonds.

The legislation, approved by the House of Councillors on Wednesday, amends the Financial Instruments and Exchange Act and the Payment Services Act. It clears a key legal hurdle for future spot Bitcoin ETFs, with the Japan Exchange Group reportedly eyeing first listings as early as 2027, though no ETF products have been approved yet.

The bill also lays the groundwork for cutting Japan's crypto tax rate from as high as 55% down to a flat 20%, split 15% national and 5% regional, expected to take effect in 2028 alongside three-year loss carry-forward deductions.

Alongside the lighter tax treatment, the new rules tighten oversight: insider trading is now prohibited, issuers face mandatory annual disclosures, and penalties for unregistered crypto operators jump sharply, from a maximum three years in prison to ten, with fines rising from 3 million yen to 10 million yen (~$61,600).

The framework is expected to take effect in 2027, ahead of the 2028 tax overhaul.