XRP Not Yet Classified as a Financial Instrument in Japan

Recent claims suggesting that $XRP has already been classified as a financial instrument in Japan are inaccurate, according to $XRP community figure Crypto Eri.

In a tweet, she addressed what she described as growing misinformation among financial influencers regarding $XRP’s classification in Japan.

Key Point

Proposed Changes, Not Current Law

The clarification centers on Japan’s evolving regulatory framework. $XRP and over 100 other crypto assets are not currently recognized as financial instruments in Japan. Instead, Japan’s Financial Services Agency (FSA) is proposing an amendment that could reclassify cryptocurrencies under the Financial Instruments and Exchange Act (FIEA).

If approved, the changes will take effect around 2027, not immediately. The proposal would introduce stricter oversight, including new disclosure requirements and penalties, as regulators respond to rising adoption and increasing fraud cases.

Japan’s crypto market has indeed expanded rapidly. It now boasts over 13 million accounts, meaning roughly one in ten residents holds a crypto asset.

Meanwhile, authorities are handling hundreds of complaints each month related to scams and malicious promotions, prompting tighter regulation. Notably, NFTs and stablecoins will remain under the existing regulatory structure.

Institutional Integration on the Horizon

According to reports from Nikkei, the proposed framework would mark a significant shift by allowing banks and traditional financial institutions to hold crypto assets for investment purposes.

This would effectively integrate digital assets deeper into Japan’s financial system. The move highlights crypto’s growing role beyond payments into mainstream investment products.

Currently, cryptocurrencies in Japan fall under the Payment Services Act. However, the shift toward the FIEA highlights how usage has evolved as investment demand grows.

Legal Concerns Around $XRP Classification

Meanwhile, the debate over classifying $XRP as a financial product is not without controversy. Legal expert Bill Morgan has warned that such a move could introduce unintended consequences.

Morgan argues that applying a securities framework to assets like $XRP could undermine their core utility as a fast, low-cost bridge currency for cross-border transactions. Increased regulatory friction could limit the flexibility that currently allows $XRP to function efficiently in liquidity and settlement use cases.

He also stressed that the definition of a “financial product” varies globally. While Japan may move toward asset-level classification, other jurisdictions, such as Australia, are focusing on regulating intermediaries instead of the assets themselves.

$XRP as a Digital Commodity in the U.S.

Meanwhile, the U.S. SEC has officially classified $XRP as a digital commodity, confirming it is not a security. The framework also classifies Bitcoin, Ethereum, Solana, and several other crypto assets as digital commodities.

Notably, the SEC says these assets derive value from their role in a functional network, not from a central entity. This marks a shift away from reliance on the Howey Test, with the SEC signaling that most crypto assets are not securities. It also clarifies that activities like staking and mining are generally not securities transactions.

Alignment with the CFTC further strengthens regulatory clarity, easing the path for more exchange listings, institutional adoption, and broader use.