Japan Approves  Crypto ETFs and Propose Taxes Reduction of 20%

• Japan’s Liberal Democratic Party (LDP) Proposes that there is a reduction of the capital gain tax on cryptocurrency from 55% to 20% 
• The Financial Services Agency (FSA) also recommends creating a new category for intermediary businesses to help reduce gaming firms and wallet providers’ barriers to engaging in crypto transactions.

Japan has set out to make significant changes to its cryptocurrency rules. The ruling party has introduced a new framework under the Financial Instruments and Exchange Act. 

Japan’s Liberal Democratic Party (LDP) , which is the nation’s ruling political party, is advancing some significant regulations in regards to cryptocurrency. 

Japan’s Plan to Lower Crypto Taxes and Redefine The Crypto Ecosystem 

Some of the changes are aimed at reducing the capital tax gain on digital assets from 55% to 20% and also establish cryptocurrencies as a distinct asset class, separate from traditional securities under the Financial Instruments and Exchange Act. 

LDP lawmaker Akira Shiizaki has indicated that this new classification is an important  component of the whole reform agenda. In addition to tax reductions, the LDP also suggests that cryptocurrency derivatives trading should also receive the same tax treatment as spot investments. 

The party also proposed that there be reduced taxes on crypto-to-crypto swaps, and taxes only charged when crypto is converted into fiat currency. 

These measures reflect Japan’s evolving stance toward digital assets, moving away from previous caution and signaling a more open approach to cryptocurrency investments.

Japan’s Previous Stance on Cryptocurrency 

Historically, Japan has maintained a balanced approach to cryptocurrency regulation, as the country strives between fostering crypto innovation and ensuring consumer protection.

In November 2024, the government passed an economic stimulus bill that included commitments to reform cryptocurrency taxation, with the LDP seeking public input on these reforms until March 31, 2025. This initiative underscores the government’s intent to adapt its policies to the growing prominence of digital assets.

To further streamline the whole cryptocurrency ecosystem, the FSA also recommended creating a new category for intermediary businesses with more simplified regulatory requirements. This proposal aims to lower barrier entries for gaming companies and wallet providers, enabling them to engage in crypto transactions without the extensive compliance obligations faced by full-scale exchanges. 

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