Japan is set to reclassify XRP as a regulated financial product under the Financial Instruments and Exchange Act by the second quarter of 2026. This move will subject XRP to stricter oversight, including enhanced disclosure requirements, licensing, and anti-money laundering compliance, aligning it with traditional investment products. The reclassification aims to strengthen investor protections and reduce legal ambiguity for exchanges and investors. The decision reflects Japan's broader strategy to refine digital asset regulation by integrating established financial laws. XRP's significant role in Japan's banking and tokenized payment systems, supported by the XRP Ledger, underscores the need for this regulatory shift. While XRP will transition from its current crypto asset status, other digital assets will remain under existing payment laws. The initiative is part of Japan's efforts to ensure structured oversight and controlled institutional participation in the digital asset market.