Japan’s Financial Services Agency (FSA) is advancing a comprehensive reform of the country’s cryptocurrency tax policy, proposing to reduce gains from digital assets to a flat 20% tax rate, aligning them with traditional financial products like stocks and bonds. The reform, expected to take effect from fiscal 2026, aims to ease the current progressive tax burden, which can reach up to 55% when including local levies, and has long been criticized for discouraging retail participation and innovation in the sector [1]. The FSA has also proposed allowing crypto investors to carry forward losses for up to three years, a benefit already available for equity investments [2]. This change is expected to lower entry barriers, increase liquidity, and stimulate trading activity in Japan’s maturing digital asset market [2].
A key objective of the reform is to reclassify digital assets under the Financial Instruments and Exchange Act (FIEA) as financial products rather than means of payment, a shift that would enable the FSA to enforce standard disclosure requirements, insider trading rules, and investor protection measures [1]. This reclassification is seen as a crucial step toward enabling the launch of cryptocurrency exchange-traded funds (ETFs) in Japan. Analysts suggest that such funds would provide a regulated and convenient avenue for investors to access digital assets, with strong domestic demand anticipated once they become available [1]. Japan’s ETF market is already a major asset class, valued at over ¥80 trillion ($560 billion), but no crypto ETFs have yet been approved. Currently, investors seek exposure through U.S.-listed Bitcoin ETFs or regulated trusts in Singapore [3].
The FSA is also expected to approve Japan’s first yen-denominated stablecoin, JPYC, later in 2024. The token will be issued by a Tokyo-based fintech company and backed 1:1 with bank deposits, aligning with the country’s stringent regulatory framework for stablecoins introduced in June 2023 [3]. JPYC Inc. aims to circulate 1 trillion yen ($6.8 billion) worth of stablecoins over the next three years, indicating growing institutional interest in digital finance. The stablecoin initiative is part of a broader strategy to integrate digital assets into Japan’s financial infrastructure and enhance the country’s competitiveness in the global digital asset space [3].
Japan’s crypto market has been growing steadily, with over 12 million active crypto accounts holding more than 5 trillion yen ($34 billion) in assets as of the first half of 2024 [1]. This marks a significant shift in investor behavior, particularly among younger, tech-savvy demographics, where crypto adoption now exceeds that of traditional products like foreign exchange and corporate bonds [1]. Japanese corporations are also playing an active role in advancing digital finance, with partnerships forming between financial institutions and fintech firms to commercialize stablecoins and expand crypto services [1].
The FSA has emphasized its dual focus on fostering innovation and maintaining strong investor protection measures. Over the years, Japan has implemented some of the strictest regulations in the world, including robust licensing requirements for exchanges and custody standards, following the collapse of major crypto firms like Mt. Gox in 2014 and Coincheck in 2018. These measures have helped maintain trust in the financial system and prevent systemic risks [1]. Now, with the proposed tax and regulatory reforms, Japan is shifting from a defensive stance toward a more proactive strategy aimed at positioning itself as a leading crypto hub in Asia.
Source: [1] Japan’s FSA Pushes Bold Crypto Tax Reform, Boosting Prospects for ETF Listings (https://coingape.com/japans-fsa-pushes-bold-crypto-tax-reform-boosting-prospects-for-etf-listings/) [2] Japan Prepares Weeping Crypto Reforms: Tax Cuts and ETF Approval on the Horizon (https://cryptodnes.bg/en/japan-prepares-wweeping-crypto-reforms-tax-cuts-and-etf-approval-on-the-horizon/) [3] Japan FSA Plans Flat 20% Crypto Tax, Opening Door To ETFs by 2026 (https://financefeeds.com/japan-fsa-plans-flat-20-crypto-tax-opening-door-to-etfs-by-2026/)
AloJapan.com