Japan Considers Cutting Crypto Tax Rate to 20%, Aiming for Parity with Traditional Financial Assets

Japan Considers Cutting Crypto Tax Rate to 20%, Aiming for Parity with Traditional Financial Assets

Japan is weighing a significant reduction in its cryptocurrency tax rate, potentially aligning it with the taxation of other financial assets. The Financial Services Agency (FSA), Japan’s financial regulator, has proposed a reform that would lower the tax rate on crypto profits to a flat 20%, down from the current rate, which can reach up to 55%.

FSA Pushes for Crypto to Be Treated Like Traditional Financial Assets

In an August 30 request for tax reform, part of a broader review of the 2025 fiscal code, the FSA advocated for treating cryptocurrencies similarly to traditional financial assets. This change, the agency argues, would make cryptocurrency investments more accessible and attractive to the general public. “Cryptocurrency should be treated as a financial asset and an investment target for the public,” the FSA stated in its report.

Currently, Japan taxes cryptocurrency earnings under the miscellaneous income category, with tax rates varying between 15% and 55%, depending on the individual’s income bracket. The high tax rate applies to earnings over 200,000 Japanese yen (approximately $1,377), placing a heavy burden on many crypto investors. In contrast, profits from stock trading are capped at a 20% tax rate—a rate the FSA suggests should also apply to cryptocurrency earnings.

Additionally, corporate holders of crypto assets in Japan are required to pay a flat 30% tax on their holdings, regardless of whether they sell their assets at a profit. The proposed changes would provide relief to both individual and corporate investors, potentially fostering a more favorable environment for cryptocurrency investment in Japan.

The Path to Tax Reform

The process of changing tax laws in Japan involves multiple steps. First, government ministries submit tax reform requests to the ruling political party. These requests are then passed to the tax system research committee before being considered by the national legislature. Both the House of Representatives and the House of Councilors must approve any reforms before they can become law.

Japan’s crypto industry has long advocated for a revision of the tax regime. In 2023, the Japan Blockchain Association (JBA) formally requested the government to reduce the tax burden on crypto assets. Their proposals included a flat 20% tax rate and a three-year loss carryover deduction to encourage growth in the sector. However, previous efforts have not yet resulted in concrete policy changes.

Rapid Growth in Japan’s Crypto Market

Japan’s cryptocurrency market is expected to see significant growth, with the number of daily crypto traders projected to increase from 350,000 to approximately 500,000 by the end of the year, according to a study by Bitget. This surge would position Japan’s market size between those of Turkey and Indonesia, and about two-thirds the size of South Korea’s market.

“Japan, with its high awareness of crypto, is a dynamic and rapidly evolving landscape,” said Gracy Chen, CEO of Bitget. She noted that the current trends and exciting possibilities in Japan make it a prime area for the adoption of new technologies and the widespread use of cryptocurrencies.

In a recent move highlighting Japan’s growing interest in the crypto space, Japanese tech giant Sony Group acquired the crypto firm Amber Japan, further solidifying the nation’s position as a key player in the global cryptocurrency market.

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