Japan’s LDP Pushes Crypto ETFs, Yen Stablecoins, and Tax Reform for On-Chain Finance

Japan’s ruling Liberal Democratic Party (LDP) is pushing reforms that would reshape the country’s cryptocurrency taxation regime and support the development of yen-denominated stablecoins, with a proposal delivered to Finance Minister Satsuki Katayama covering stablecoins, exchange-traded funds (ETFs), central bank digital currencies (CBDCs), and broader blockchain applications.

“According to a Nikkei Asia poll published on Sunday, leading Japanese brokerage firms are preparing to sell cryptocurrency investment funds to retail investors”

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The LDP’s blockchain promotion panel also urged concrete steps including doubling the leverage cap for retail cryptocurrency derivatives trading and establishing a regulatory framework for ETFs linked to digital assets, as Japan moves to formalize on-chain finance within its regulatory landscape.

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In the same policy push, LDP member Junichi Kanda emphasized expanding on-chain finance across Asia with a specific focus on the development and adoption of yen-denominated stablecoins, while Katayama reportedly signaled urgency by saying Japan “must move forward without falling behind global developments.”

The proposal arrives after Japan approved changes to classify crypto assets as financial instruments rather than solely as a means of payment, a shift described as paving the way for broader use cases and investor protections.

The Financial Services Agency (FSA) was also reported to be preparing amendments to the regulatory framework to accommodate crypto ETFs, aligning Japan’s direction with the broader regulatory dialogue described in the same reporting.

The LDP’s stablecoin push is framed around yen-denominated stablecoins as a settlement tool across Asia, with the proposal tying the effort to a broader attempt to keep the yen relevant in an increasingly tokenized regional economy.

The reporting places yen stablecoins in stark contrast to dollar-pegged tokens, citing Bank for International Settlements data that yen-stablecoins account for less than 0.01% of the market capitalization of dollar-stablecoins.

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In that context, Junichi Kanda told reporters that Japan should “advance initiatives to expand on-chain finance across Asia — including the development and adoption of yen-denominated stablecoins,” positioning the tokens as both a settlement layer and a strategic instrument.

The same coverage also notes that Japan’s approach is unfolding alongside global policy developments, including US legislation to create a framework for payment stability tokens and international bodies exploring standard-setting for crypto assets.

A separate Reuters-linked framing in the reporting says the LDP urged Japan to promote yen-pegged stablecoins as a means of settlement in Asia in the future, while also calling for a legal framework for trading crypto ETFs.

Beyond the LDP’s policy recommendations, the reporting describes a wider push to integrate crypto into mainstream financial infrastructure through regulatory clarity, including the FSA’s reported work to permit crypto ETF listings.

“Japan LDP Panel Urges Yen Stablecoins for Asian Payments, Calls for Crypto ETF Rules Summary - Japan’s Liberal Democratic Party blockchain promotion panel said it had proposed that the government expand the use of yen stablecoins and establish a framework for crypto ETFs”

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In parallel, the same coverage points to the United States’ “CLARITY Act” as an example of codified rulebooks replacing ad hoc interpretations, with Coinbase Chief Policy Officer Faryar Shirzad calling it crypto’s “Dodd-Frank moment” and saying it cleared the Senate Banking Committee in mid-May by a 15-9 margin.

The Japan-focused reporting also ties the ETF and stablecoin agenda to institutional access, noting that the proposals include establishing a framework for ETFs tied to digital assets and that Katayama oversees the work of the Financial Services Agency (FSA).

Separately, a Nikkei Asia report described SBI and Rakuten creating cryptocurrency trust funds and aiming to sell cryptocurrency investment funds to retail investors, with the products intended to let clients invest in bitcoin and ethereum without a separate exchange account or digital wallet.

That same Nikkei Asia-linked coverage says the FSA targets 2028 for revising the investment funds law and proposes a 20% tax rate to replace the current maximum of 55%, while also describing a longer-term possibility for Bitcoin spot ETFs on the Tokyo Stock Exchange pending FSA rule definitions.