Key Changes to Cryptocurrency Taxation
Japan is implementing one of its most significant crypto tax reforms, aiming to introduce a flat 20% levy on cryptocurrency trading gains. This move signifies a major shift in the country's approach to the crypto market and is expected to provide long-awaited tax relief for retail investors.
Currently, crypto tax in Japan can reach up to 55% because profits are categorized as "miscellaneous income." This means that crypto gains are added to a person's salary and taxed under a progressive system.
Under the new proposal, cryptocurrency gains will be taxed at a fixed 20%, aligning with the current tax rate applied to stocks and investment funds.
Details of the 2026 Flat Levy
The reform, anticipated to be included in the nation's 2026 tax policy, will place digital assets in a separate tax category, distinct from salaries or business earnings. The proposed 20% collection will be distributed as follows:
- •15% of cryptocurrency income will go to the national government.
- •5% will be allocated to local prefectural and municipal authorities.
This reduction in the tax burden is expected to stimulate trading activity and strengthen Japan's digital-asset ecosystem, which is already one of the most active globally. Industry data indicates that Japan has approximately 8 million active crypto accounts, with a September spot trading volume reaching 1.50 trillion yen ($9.6 billion). If enacted, this reform would position Japan among countries with more competitive virtual product tax and regulation regimes.
Expansion in the Virtual Asset Area
Beyond taxation, the Japanese government is advancing broader cryptocurrency regulation to keep pace with the global digital race. The Financial Services Agency (FSA) is developing rules that would classify digital assets as financial products, making them subject to insider-trading laws. This regulation is set to apply to all 105 cryptocurrencies listed on domestic exchanges.
Additionally, Japan is introducing a rule requiring exchanges to maintain reserve funds to protect customers in the event of hacks or system failures. Previously, exchanges were only mandated to keep customer assets in cold storage, without the requirement for additional reserves.
These regulatory moves are being accelerated as the continent actively participates in the digital space. India, with an estimated 100 million crypto users, is reviewing its Virtual Digital Asset (VDA) policies after years of heavy taxation and strict Anti-Money Laundering (AML) rules, with evaluations focusing on stablecoin regulation and definition clarity. South Korea, another country with significant crypto adoption, plans to require sender and receiver details for crypto-asset transfers, even those under 1 million won ($680), aiming to close loopholes that previously allowed users to bypass reporting requirements.
Anticipation from Asset Managers
Major financial institutions, including Nomura Asset Management, Daiwa, Mitsubishi UFJ, and Amova, are establishing crypto-focused teams. These firms are evaluating new fund offerings for both retail and institutional investors, anticipating an increase in demand once the new Japanese crypto tax regime is implemented.
While challenges such as pricing benchmarks, custody systems, and liquidity management persist, the momentum for crypto adoption and integration in Japan is clearly growing.