Japan’s Crypto Future Under Takaichi: Why the FSA, Not Politics, Will Shape Regulation in 2026

Any discussion of a Takaichi-led Japan has to start with the political math she inherits. A Takaichi cabinet would start from a relatively fragile parliamentary position—the Liberal Democratic Party (LDP) in the minority in both houses, the loss of Komeito, and only limited support from Nippon Ishin—which naturally narrows the space for bold, unilateral policymaking. Much of her political capital will need to be directed toward issues that voters watch most closely and toward navigating opposition demands.

At the same time, Japan is managing persistent inflation for the first time in decades, with households feeling a noticeable squeeze in real incomes. In such an environment, any administration with a delicate foundation will be compelled to focus on visible measures around inflation, wages, and social security. It’s within this broader political and economic context that upcoming decisions on crypto and digital-asset regulation will take shape.

Japan is also navigating its most complex security environment in Northeast Asia since the end of the Cold War, with China, North Korea, and Russia all central to public debate. It’s natural that defence spending, economic security, and sanctions policy sit high on the agenda. Within this broader landscape—where prices, pensions, healthcare, and childcare shape most voters’ daily concerns—crypto and digital-asset policy will evolve alongside these larger national priorities, rather than compete with them.

The four regulatory priorities defining Japan’s crypto future

Against that background, I would expect four main regulatory priorities for crypto and digital assets in Japan over the next year.

First, the legal reclassification of crypto assets as financial products and the corresponding extension of market-integrity rules. The Financial Services Agency (FSA) has already signalled its intention to revise the Financial Instruments and Exchange Act to give certain crypto assets explicit status as financial instruments, bringing them within the scope of insider-trading and market-abuse regulations. This is not merely a technical change. It would shift the conceptual frame from “payment-like tokens that happen to be volatile” to “speculative financial products that must be regulated like securities or derivatives”. Over the coming year, the priority will be to refine the scope (which tokens, under what criteria), to design workable rules for information disclosure by issuers and service providers, and to align supervision of crypto trading venues with existing standards for securities markets.

Second, a serious political debate over tax reform, even if the outcome is not yet guaranteed. At present, individual gains from crypto trading are generally taxed as miscellaneous income, subject to progressive rates of up to 55%. Industry bodies have for years requested a shift to a flat 20% separate taxation regime, aligned with listed equities, and recent press reports suggest that policymakers are now considering precisely such a move. If, as envisaged, crypto gains were taxed at a uniform 20% rate with loss carry-forward, that would remove a major structural disincentive for domestic investors and reduce the incentive for talent and capital to move offshore. However, it is crucial to underline that this remains a prospective reform, not a done deal. Given fiscal constraints and public sensitivities around “tax breaks for investors”, any change will likely be packaged with stronger investor-protection and disclosure rules to make it politically defensible.

Third, the strengthening of disclosure, cybersecurity, and operational-resilience requirements, particularly in connection with the entry of major banking groups and securities firms into the crypto market. The FSA has been considering regulatory changes that would allow securities subsidiaries of banking groups to offer crypto trading services and, potentially, to relax bans on banks holding crypto for investment purposes. If large, regulated financial conglomerates are to be allowed into this space, regulators will naturally seek to raise the floor on risk management: more detailed risk disclosures to retail clients, stricter standards for custody and segregation of customer assets, and more robust expectations for system resilience against hacks and outages. For the crypto industry, this will look like “more red tape”; from the regulator’s perspective, it is simply aligning risk controls with the profile of the new entrants.

Fourth, continued tightening of AML/CFT and sanctions-evasion controls, even if this does not generate headlines. Japan has already implemented the FATF Travel Rule and other measures, but the geopolitical context—particularly North Korean cyber-enabled theft and sanctions evasion—ensures that crypto remains on the radar of law enforcement and security agencies. Over the next year, we can expect incremental but meaningful steps, including more granular expectations around blockchain analytics and risk-based transaction monitoring, closer coordination between the FSA and law enforcement on typologies, and potentially increased pressure on offshore platforms that serve Japanese residents without adequate controls. This will not be sold domestically as “Web3 policy” at all; it will be framed in terms of national security and financial crime prevention.

Crypto is still not mainstream in Japan

All of this takes place in a country where, despite the gradual growth of the market, public interest in crypto and digital assets is still limited. Surveys suggest that only a modest share of Japanese adults hold crypto assets, and that most households prioritize far more traditional concerns. In that sense, it is misleading for some in the industry to claim that Japan’s government or the FSA is “killing innovation”. The more prosaic reality is that crypto is a niche asset class in the eyes of most voters, and therefore a second- or third-tier policy issue. 

Part of the responsibility lies with policymakers who have been slow and cautious. Yet, part of it also lies with segments of the crypto and Web3 industry, which have invested more energy in lobbying for deregulation than in building broad-based public understanding and trust.

Under a Takaichi administration with a weak political base, that basic structure, I think, will not change. The Prime Minister will be preoccupied with inflation, real incomes, and security. Within that space, the FSA will continue to quietly reshape the regulatory framework for crypto: treating major tokens more like financial products, debating a shift to a 20% tax regime, raising the bar on disclosure and cybersecurity as traditional financial institutions enter, and sharpening AML/CFT expectations in light of regional security risks. Those are likely to be Japan’s true “regulatory priorities” for crypto over the next year—not because crypto has suddenly become central to national politics, but precisely because it has not.