Japan's Crypto ETF Plan: How Tokyo Could Reshape Asia's Digital Asset Market by 2028

Japan’s financial regulators just unveiled a blueprint that could transform the country into Asia’s next crypto powerhouse. The Financial Services Agency is preparing to legalize spot cryptocurrency ETFs by 2028, along with slashing crypto taxes from a punishing 55% to a flat 20%. For a nation where high taxation has kept retail investors on the sidelines, this signals a seismic policy shift. The move marks Japan stepping into Asia’s rapidly intensifying regulatory competition, where crypto adoption frameworks are becoming as consequential as trade agreements.

The potential is massive. Industry analysts estimate Japan’s crypto ETF market could eventually manage ¥1 trillion ($6.7 billion) in assets, based on comparisons to the US market where spot Bitcoin ETFs alone now exceed $120 billion in holdings. But size isn’t the only story here—Japan crypto regulations are finally catching up to market reality.

Three Policy Pillars Reshaping Japan’s Digital Asset Framework

The FSA’s overhaul rests on three interconnected moves. First, it intends to amend the Investment Trust Act’s enforcement order by 2028, officially adding cryptocurrencies to the list of “specified assets” eligible for investment trust structures. Once Tokyo Stock Exchange grants approval, crypto ETFs would trade through standard brokerage accounts, mirroring the structure already used for gold and real estate ETFs. Major domestic asset managers—Nomura and SBI Global—are already prototyping products in anticipation.

The second pillar hits directly at investor psychology: taxation reform. The FSA plans to submit legislation to Japan’s parliament in 2026 that would reclassify digital assets under the Financial Instruments and Exchange Act, bringing the maximum tax rate down to 20%. Currently, long-term crypto gains face rates as high as 55%, creating a massive disincentive for retail participation. Analysts widely expect this tax cut to unlock pent-up demand from investors who’ve been sitting on unrealized gains for years.

The third pillar strengthens custody and investor protection. Following the 2024 DMM Bitcoin hack—which wiped out ¥48.2 billion in customer funds—regulators are now mandating enhanced security standards for trust banks holding ETF assets. Securities firms and asset managers will face stricter disclosure and operational requirements ahead of the 2028 launch. The lesson: investors won’t trust a market unless losses aren’t possible.

Asia’s Diverging Paths: How Japan Compares

While Japan plays the patient strategist, the rest of Asia is already moving. Hong Kong remains the only regional market offering retail-accessible spot crypto ETFs, launching Bitcoin and Ethereum products in April 2024, then adding Solana ETFs by October 2025. Yet Hong Kong’s total crypto ETF assets sit at just $500 million—suggesting the real opportunity still lies ahead.

South Korea is advancing its Digital Asset Basic Act through legislative channels, with spot Bitcoin ETFs forming a core campaign promise. However, upcoming local elections may slow momentum. Taiwan expanded access in February 2025, permitting domestic funds to purchase overseas crypto ETFs, and is drafting a dedicated digital asset law that could enable a New Taiwan dollar–backed stablecoin by mid-2026. Singapore remains the laggard, with the Monetary Authority still restricting retail crypto ETF access, arguing digital tokens remain unsuitable for collective investment schemes.

This divergence means Japan crypto policy sits at a critical juncture. Move too slowly and Hong Kong’s first-mover advantage compounds. Move too recklessly and custody failures repeat. The 2028 timeline appears designed to split the difference.

Why Japan’s Late Entry Could Prove Strategic

By targeting 2028, Tokyo gains two crucial advantages. First, it can study how US regulatory scrutiny actually impacts spot Bitcoin ETF operations and Hong Kong’s crypto ETF ecosystem matures. Second, it builds a fortress of custody standards, tax clarity, and investor protections that could prove more durable than hastily assembled frameworks.

The risk is real though: while Japan deliberates, South Korea legislates and Hong Kong expands product offerings. Asia’s regulatory race is accelerating, and capital flows tend to chase clarity first, returns second. For Japan crypto markets to truly capture regional capital, tax reform and ETF approval need to move forward not just as planned, but faster than the Asia competition assumes.

The window from now through 2028 will determine whether Japan becomes a market maker or a market follower in Asia’s digital asset revolution.