Japan’s Financial Services Agency (FSA) has revealed plans to reform the country’s tax code by fiscal year 2025, aiming to reduce tax burdens on crypto assets.
In an August 30th announcement, the FSA emphasised the need for crypto assets to be treated similarly to traditional financial assets, signalling a significant shift in Japan’s approach toward digital currencies.
Crypto Tax From 55% To 20% By 2025
According to crypto accounting company TokenTax, cryptocurrency revenues are now taxed at 15% to 55% in Japan and are categorised as miscellaneous income. Depending on the taxpayer’s income band, earnings over 200,000 Japanese yen ($1,377) are subject to the highest rate of 55%. However, according to the FSA’s new idea, cryptocurrency should be reclassified as a financial asset so that investors can benefit from more benevolent tax laws.
The proposed changes would reduce the tax rate on cryptocurrency gains and would possibly promote the use of digital currencies more widely in Japan.
The FSA wants to make it possible for the general public to view digital currencies as respectable investment options by bringing cryptocurrency investments into line with more traditional financial products. This action might increase investor trust.
The FSA is still determining the extent to which virtual digital currencies (VDAs) can be treated as financial assets for investment purposes.
Depending on the outcome, Japan may enter the crypto exchange-traded fund (ETF) space, following in the footsteps of the United States and Canada. Alternatively, Japan could decide to take a more cautious approach and refrain from offering crypto ETFs at this time.Â
Japan’s Growth in Cryptocurrency Adaptation
The reform comes at a time of rapid growth in Japan’s cryptocurrency market. Statista reports that the number of crypto holders in the country rose significantly from 6.4 million in 2022 to 8.82 million in 2023. The surge in interest follows a renewed focus on digital assets by both government officials and major corporations.
Japan’s prime minister, Fumio Kishida, stated in July 2023 that his country is determined to make Web3, a decentralised internet powered by blockchain technology, the cornerstone of the country’s economic future. Web3 is “the new form of capitalism,” as Kishida put it, highlighting the government’s intention to support innovation in the digital economy.
Leading companies have already returned to the Japanese market as a result of the changing regulatory environment. Notably, after a protracted absence, international cryptocurrency exchange Binance returned to Japan, enhancing the nation’s standing as a developing centre for digital assets.