Japan Eyes Crypto ETFs and Yen Stablecoins as $320B Digital Asset Race Heats Up

Key Takeaways:

• Japan is continuing its crypto ETF and digital asset tax reforms.
• Yen backed stablecoins, a major component in the country’s blockchain strategy, are starting to emerge.
• Unsurprisingly, in an era of increased regulation, new proposals signal stronger government backing for on-chain finance.

Japan is progressing towards a new phase in crypto regulation. The country’s ruling Liberal Democratic Party (LDP) has come together in a blockchain-focused group that formally presented the recommendations to Minister of Finance Satsuki Katayama that might change the face of Japan’s digital asset market.

The main areas of interest in the proposals are crypto taxation, exchange-traded fund (ETF), stablecoins, and advancing the development of blockchain financial infrastructure.

The Parliamentary Association for the Promotion of Blockchain urged policymakers to continue preparations for a separate taxation system for crypto assets, assuming future regulation under Japan’s Financial Instruments and Exchange Act.

The recommendations also call for reviewing taxation on crypto-to-crypto transactions, inheritance-related treatment of digital assets, and rules surrounding crypto donations.

Another interesting suggestion is the crypto derivatives category. The bill’s sponsors proposed that this leverage limit for retail trading be raised over time from the current two-times leverage cap. They urged regulatory measures to enable crypto ETFs to enter the Japanese market, too.

The measures are part of Japan’s increasing efforts to catch up with what is occurring in other key markets like the U.S.

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A key theme throughout the recommendations is the advancement of on-chain finance, where issuance, ownership, trading, and settlement of financial assets occur directly on blockchain networks.

LDP lawmaker Junichi Kanda pointed out one of the critical policy areas for 2026, which is on-chain finance. He stressed the importance of the extension of financial services using blockchain technology throughout Asia and singled out yuan denominated stablecoins as a potential growth opportunity.

This push comes following the growing significance of stablecoins in international finance. Based in part on the fact that yen remains in top position in the emerging digital economy, the US dollar-backed stablecoins coins now seem to have low priority for policy makers in Japan.

As the talks about stablecoins and on-chain finance have picked up speed abroad, reportedly the Minister of Finance Katayama emphasized that Japan has to not be left behind.

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The latest recommendations are not being developed in isolation. Several influential lawmakers involved in the blockchain group are also participating in separate policy initiatives focused on artificial intelligence and on-chain financial infrastructure.

In previous recommendations these policy groups had proposed to designate on-chain markets as a national strategic priority and create new-generation financial infrastructure centered on stablecoins and tokenized deposits.

Some of these recommendations may be seen in Japan’s forthcoming economic policy blueprint for 2026, local reports said. If implemented, the reforms would represent a further advance in decarbonizing Japan’s economic policies with blockchain technology, digital assets and tokenized finance.

The reality from Japan for the crypto sector is growing increasingly apparent: the country wishes to be more central to the future of digital finance than it remains in the center of it.

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