Japan's Liberal Democratic Party proposes five major policies including crypto ETFs and stablecoins! Calls on the finance minister: on-chain finance is a national strategy

The Japan Liberal Democratic Party has put forward policy recommendations to promote the development of cryptocurrency ETFs and the Japanese yen stablecoin, calling for on-chain finance to be classified as a national strategy. This is intended to respond to threats from the US dollar and the digital yuan, thereby strengthening Japan’s financial leadership in Asia.

The Liberal Democratic Party of Japan submits five major blockchain policy recommendations

Japan is making a major push into blockchain technology! The Blockchain Technology Promotion Parliamentary League of Japan’s ruling Liberal Democratic Party submitted policy recommendations to the government yesterday, stating that Japan must promote the yen stablecoin’s settlement applications in Asia, establish a legal framework that allows cryptocurrency ETF trading, and urging: “We should treat on-chain finance as a national strategy.” The proposal was submitted to the Japanese Minister of Finance, Kayomatsu Katayama (Kasayama Aya/Takatsuki?), who oversees the Financial Services Agency (FSA).

Policy recommendations focus on five key areas

The policy recommendations proposed by the Liberal Democratic Party’s Blockchain Promotion Parliamentary League focus on the following five areas:

Overseas currency exchange businesses, DeFi regulation

With respect to unregistered cryptocurrency operators, the policy recommendations specifically call for strengthening relevant countermeasures.

At present, there are still blind spots that law enforcement finds difficult to reach, such as investment solicitation through media and influencers, as well as fund transfers conducted through domestic payment providers. To this end, the LDP calls on the government to strengthen law-enforcement cooperation with regulators in other countries, and to further clarify legal restrictions targeting stealth marketing.

In addition, regarding services such as decentralized finance (DeFi), the proposal also recommends that the government begin exploring market discipline and the regulatory boundaries in order to ensure that industry development and risk control advance in tandem.

• Related report: Japan’s Financial Services Agency cracks down! Japanese media reports: These 5 exchanges have been removed from the App Store

Cryptocurrency tax system

The proposal first affirms the policy in the 2026 tax reform to explicitly introduce a separate declaration taxation system, and calls for further consideration of mechanisms that allow investors to freely choose between separate declaration taxation and separate source taxation (i.e., withholding at source).

• Related report: Japan’s crypto taxes may fall to 20%! Plan to classify 105 tokens as commodities; ICO projects must disclose periodically

The proposal also calls on the government to re-examine the taxation approach for exchanges between cryptocurrencies, as well as the standards for handling cryptocurrencies under inheritance tax and gift tax.

• Katayama Aya’s response: If relevant legislation can pass smoothly through this session of the National Diet, and assuming industry players complete the necessary system buildout, a new tax system could be launched as early as January 2028.

Image source: Twitter of Japanese House of Representatives member Junichi Kanda. The LDP submits five major blockchain policy recommendations to Minister of Finance Kayomatsu Katayama.

Cryptocurrency ETF

In April of this year, the Japanese Cabinet approved a draft amendment, reclassifying cryptocurrencies from payment instruments to financial products.

The LDP urges the government, while ensuring investor protection and market soundness, to establish a clear legal framework for cryptocurrency ETFs, position them as legitimate investment instruments, and enable Japan to align with major markets such as the United States and Hong Kong.

• Katayama Aya explained that market demand for cryptocurrency ETFs is high, and from a technical standpoint this is not difficult; it is expected to be realized early within the timetable for transfer under the Financial Instruments and Exchange Act.

Cryptocurrency trading leverage regulation

Currently in Japan, the leverage limit for individual crypto derivatives trading is 2x. The proposal suggests, in conjunction with system designs such as margin management, exploring phased increases to an appropriate proportion.

• Japanese House of Representatives member Junichi Kanda pointed out that, a survey shows that if leverage were relaxed to 6 to 10 times, about 70% of respondents would be willing to move their trading back to domestic providers, and Katayama Aya also agrees that the current 2x level is too low.

CBDC and stablecoin strategy

Regarding the application development strategy for central bank digital currency (CBDC) and stablecoins, the recommendations require the government to formulate a clear development blueprint. The plan not only focuses on reforms to the financial system, but also expands to applications in the real economy—advocating that in the fields of trade and logistics, the institutional operation should be comprehensively converted to a model premised on electronic data, thereby expanding the practical introduction of blockchain technology.

The government needs to further clarify the stablecoin’s clear legal position, especially by assessing the feasibility of using stablecoins for paying salaries and paying taxes. To promote cross-border stablecoin payments, the proposal also asks the government to accelerate the drafting of regulations related to stablecoins issued by banks and to establish cross-national standards with international interoperability.

The Financial Services Agency is currently actively supporting experimental projects conducted jointly by Japan’s three largest banks to issue stablecoins. For related coverage, see: Japan’s three major banks join forces! Yen stablecoin verification kicks off; the Financial Services Agency promotes a new era of digital payments.

Why classify on-chain finance as a national strategy for Japan

Recently, Seiji Kihara, chairman of the Next-Generation AI and On-Chain Finance Concept Project Team of the LDP, explained in an interview with NADA News the reasons for regarding on-chain finance as a national strategy.

Kihara said that as on-chain development accelerates globally, Japan’s financial and monetary sovereignty may be threatened; therefore, Japan must ensure national leadership in the financial sector. He also mentioned that the use of the US dollar stablecoin is increasing, and that US companies such as JPMorgan are actively developing tokenized deposits.

To avoid Japanese companies being pulled into the US dollar stablecoin economic circle and causing capital outflows, it is crucial to prepare on-chain financial tools based on the yen. Kihara noted that if China’s digital yuan is combined with quantum cryptography, it would pose a significant threat as well, and Japan needs to offer other financial options for Asian countries.

In terms of the domestic financial system, providing clear direction to the government can help overcome the problem of dual investment in both traditional systems and emerging on-chain financial systems, and can also encourage banks to transform into platform providers.

The yen stablecoin JPYC issuance has surpassed 3 billion yen

Japan’s stablecoin market at home is booming. The issuer of the yen stablecoin JPYC announced that as of June 2, the cumulative issuance amount on the JPYC issuance and redemption platform has exceeded 3 billion yen, and the cumulative number of accounts opened has reached 19,000.

Since its official launch in October 2025, JPYC achieved this milestone in just about 7 months.

Because Asia is an important trading partner for Japan, and the yen’s settlement share in that region is extremely high, if the yen stablecoin and on-chain finance can be promoted, Japan’s trade advantage in Asia could be further strengthened.

After meeting with Katayama Aya, Junichi Kanda revealed that Japan can take measures to promote the yen stablecoin and blockchain innovation when hosting the Asian Development Bank’s annual meeting next May. By showcasing these innovative technologies, Japan is actively seeking to secure leadership in Asia’s next-generation financial system.

Further reading:
Japan’s Finance Minister: 2026 is Japan’s digital year; fully supporting cryptocurrencies entering the stock exchanges