Japan: is a crypto tax cut on the way?

Japan seems intent on cutting crypto taxes. This was revealed by Nikkei with an article published today on its official website.

However, this is not the only significant new development coming to Japan regarding cryptocurrencies. 

The tax cut on crypto in Japan

For now, it is not yet a political decision that has been made and approved, but only an intention of the Financial Services Agency (FSA) of Japan, which is the Japanese government agency overseeing the financial markets. 

The agency would like to treat criptovalute as financial products similar to securities, therefore it could reduce the current tax rate from 55% to 20%.

There are, however, two unknowns. 

The first is that such an intention by the FSA does not necessarily mean that the country’s government agrees. The FSA cannot change the laws, and to consider criptovalute as financial products similar to securities will presumably require a passage in Parliament. 

The second, even greater unknown is that it is not strictly stated that if cryptos were declared in Japan as financial products similar to securities, then the taxation should decrease from 55% to 20%. 

However, at least this second unknown seems unlikely, because if crypto are actually equated to other financial products, then the law on financial products should be applied to them. 

As for the first unknown, it is not known today what the real possibilities are that the Japanese government and Parliament will share the idea of the FSA. 

The Bitcoin spot ETF

The second innovation revealed by Nikkei is that the FSA seems intent on approving ETFs on Bitcoin spot in Japan.

In fact, currently in the country there is a ban on spot Bitcoin ETFs, which the FSA would like to revoke. 

It must be said, however, that the reform of the system that currently regulates cryptocurrencies in Japan is expected to be announced only in June, therefore these are not imminent changes. 

Even the possible approval of a spot Bitcoin ETF would be a consequence of the decision to review the treatment of virtual assets to consider them as financial products equivalent to securities.

Currently, however, the FSA is only in the discussion phase of these ideas, and it seems to be consulting with industry experts through private studies.

The hypothesis they are considering is that the current regulations on virtual assets are no longer sufficient, and therefore they need to be adjusted. 

The timing for the crypto tax reform in Japan

As mentioned earlier, it is not expected that the FSA will publicly announce its hypothesis for reforming crypto regulations before June.

In reality, the timing for its entry into force seems even longer.

First of all, the FSA will have to consult with the Financial Council, and this will meet only after the autumn. 

Subsequently, an amendment to the current law will need to be presented to Parliament, and the hypothesis is that this proposal could be officially presented during an ordinary session of the National Diet in 2026.

On the other hand, not only is the current one still just a study phase, but even the news is still just a rumor from Nikkei, without any official confirmation. 

Japan and the crypto

Japan was absolutely one of the first countries in the world to accept the existence and circulation of Bitcoin. 

Probably it is not a coincidence that the creator of Bitcoin, Satoshi Nakamoto, chose a Japanese pseudonym to introduce himself to the world.

Even the first major crypto exchange in the world, Mt. Gox, was Japanese, even though its CEO was French. Mt. Gox then went bankrupt in 2014 after suffering thefts, and since then Japan has been increasingly replaced by other countries as the home of the main crypto exchanges.

After what is happening in the USA, with the current President who is a well-known supporter of crypto, other countries will also have to adapt in some way if they do not want to be left out of this sector. 

Therefore, even Japan, which has never been against cryptocurrencies, but for years has ceased to be a hub of the crypto sector, cannot afford to fall behind, with, for example, a tax on crypto capital gains at 55%, while that on other financial assets is at 20%.

In light of all this, it is clear why the FSA has decided to take a step forward and remove those obstacles that are preventing the country from being a bull in the crypto sector.