Japan is considering a change to its crypto tax code, aiming to lower it to align with other financial assets. The Financial Services Agency (FSA) has proposed a reform that could lower the tax rate on crypto profits to a flat 20%. This proposal was outlined in an August 30 request for tax reform as part of a broader review of the fiscal code for the year 2025. The FSA advocates for treating cryptocurrencies as traditional financial assets, making them more accessible for public investment. Currently, Japan taxes cryptocurrency earnings under a miscellaneous income category with rates ranging from 15% to 55% based on the individual’s income bracket. The FSA suggests that cryptocurrency should be taxed similarly to stock trading profits, which are capped at a 20% tax rate. Corporate holders of crypto assets are currently required to pay a flat 30% tax on their holdings, irrespective of whether they sell their assets at a profit.
The proposed changes would offer relief to both individual and corporate investors in the crypto space, making the tax landscape more favorable for crypto in Japan. The process of changing tax laws in Japan involves multiple steps, including submitting tax reform requests to the ruling political party and subsequent approval by the national legislature. Advocates within Japan’s crypto industry have long been requesting a revision of the tax regime to reduce the burden on crypto assets. Efforts from organizations like the Japan Blockchain Association (JBA) have proposed a flat 20% tax rate and a three-year loss carryover deduction to promote growth in the sector, although concrete policy changes have not yet been implemented.
Japan’s active crypto trading population is projected to grow rapidly, with the number of daily crypto traders expected to increase from 350,000 to about 500,000 by the end of the year. This growth would place Japan’s market size between Turkey and Indonesia and about two-thirds the size of South Korea’s market. The high awareness for crypto in Japan and the dynamic landscape make it a prime area for new technologies and widespread use. Recently, Japanese tech giant Sony Group made a move into the crypto market by acquiring the crypto firm Amber Japan, signaling the increasing interest and involvement of traditional companies in the crypto space in Japan.
Overall, the potential changes in Japan’s crypto tax code could significantly impact the crypto investment landscape by lowering tax rates to make it more comparable to other financial assets. The FSA’s proposal to treat cryptocurrencies as traditional financial assets is a step towards making them more accessible for public investment. These changes would offer relief to both individual and corporate investors in the crypto space, potentially encouraging further growth and adoption in Japan. The country’s active crypto trading population is expected to expand rapidly, positioning Japan as a dynamic and evolving landscape for crypto technologies and widespread use. As Japan continues to explore ways to enhance its crypto tax regulations, the industry is poised for further development and potential innovation in the coming years.
