Crypto News: Japan to Legalize Crypto ETFs by 2028 as Asia’s Regulatory Race Accelerates

Japan is preparing to legalize cryptocurrency exchange-traded funds (ETFs) by 2028, signaling a major policy shift as Asia’s second-largest economy moves toward mainstream digital asset adoption.According to a Nikkei report, Japan’s Financial Services Agency (FSA) plans to overhaul its investment framework, paving the way for spot crypto ETFs while simultaneously cutting crypto taxes from as high as 55% to a flat 20%.The move positions Japan as a late but potentially influential entrant in Asia’s increasingly competitive crypto ETF landscape.Japan plans major regulatory overhaul for crypto ETFsThe FSA intends to amend the enforcement order of the Investment Trust Act by 2028, adding cryptocurrencies to the list of eligible “specified assets” permitted for investment trusts.Once approved by the Tokyo Stock Exchange, crypto ETFs would be tradable through standard brokerage accounts, following a structure similar to existing gold and real estate ETFs.Major domestic players are already preparing for the shift. Nomura Asset Management and SBI Global Asset Management are reportedly developing ETF products in anticipation of regulatory approval.Industry estimates suggest Japan’s crypto ETF market could eventually reach ¥1 trillion ($6.7 billion) in assets under management, based on comparisons with the US market, where spot Bitcoin ETFs now hold more than $120 billion.Proposed crypto tax cut could unlock investor demandOne of the most impactful reforms involves taxation.The FSA plans to submit legislation to Japan’s parliament in 2026 that would reclassify cryptocurrencies under the Financial Instruments and Exchange Act. If passed, the change would reduce Japan’s maximum crypto tax rate from 55% to a flat 20%, aligning digital assets with equities and investment trusts.Japan’s high tax burden has long discouraged retail participation, with many investors reluctant to realize gains. Analysts say the proposed tax cut could unlock significant pent-up demand once ETFs become available.Investor protection strengthened after past exchange failuresRegulators are emphasizing investor protection following previous market disruptions.Trust banks responsible for ETF custody will be required to implement enhanced security standards, a move shaped in part by the 2024 DMM Bitcoin hack, which resulted in losses totaling ¥48.2 billion.Asset managers and securities firms will also face stricter disclosure and operational requirements ahead of the planned 2028 launch.Asia’s crypto ETF landscape remains fragmentedJapan’s move comes as Asia continues to adopt divergent approaches to crypto investment products.Hong Kong remains the only Asian market offering spot crypto ETFs to retail investors. It launched Bitcoin and Ether ETFs in April 2024 and added Solana ETFs in October 2025, though total assets remain modest at around $500 million.South Korea is advancing its Digital Asset Basic Act through a ruling-party task force. While spot Bitcoin ETFs were a key campaign promise of President Lee Jae-myung, progress may slow ahead of upcoming local elections.Taiwan expanded access in February 2025, allowing domestic funds to invest in overseas crypto ETFs. Regulators are also drafting a dedicated crypto law, with a New Taiwan dollar–backed stablecoin potentially launching by mid-2026.Singapore continues to restrict crypto ETFs for retail investors, with the Monetary Authority maintaining that digital tokens remain unsuitable for collective investment schemes.Japan’s late entry may offer strategic advantageBy targeting 2028, Japan gains time to study regulatory outcomes in the US and Hong Kong while building stronger custody, taxation and investor-protection frameworks.However, with Hong Kong expanding product offerings and South Korea pushing legislation, competition for regional crypto capital is intensifying.As Asia’s regulatory race accelerates, Japan’s upcoming reforms could mark one of the most consequential shifts in the region’s digital asset market — especially if tax reform and ETF approval move forward as planned.