Japan plans to shift its cryptocurrency tax system from progressive rates, which can reach up to 55%, to a flat 20% levy on trading gains. This reform aims to align digital asset taxation with that of stocks and other mainstream investments, with the goal of reviving domestic trading activity and attracting institutional products.
Under the proposed changes, income derived from cryptocurrency trading will be taxed separately from salaries or business earnings. The flat 20% tax will be split, with 15% allocated to the central government and 5% to local authorities.
Lawmakers supporting the reform believe that a reduced tax burden will encourage more trading within Japan's domestic market. They also anticipate that this move will spur innovation in blockchain technology and attract asset management firms, including major players like Nomura, Daiwa, MUFG, and Amova, to develop new products.
The reform is expected to be incorporated into Japan’s 2026 tax policy outline, which is slated for release later this year. Currently, the high progressive tax rates on digital assets have been a deterrent to domestic investors. In contrast, gains from equities and investment trusts are already taxed at a uniform 20%.
Supporters of the reform argue that it will not only revive trading activity but also potentially lead to higher overall tax revenue. Furthermore, they see it as a catalyst for broader technological innovation, particularly in services built around blockchain infrastructure.
This initiative reflects a growing recognition by the Japanese government that cryptocurrencies have matured into a standard investment category, moving away from their perception as a fringe asset class. Data from the Japan Virtual and Crypto Assets Exchange Association indicates a significant number of active crypto accounts in the country, estimated at approximately eight million.
Major financial institutions are already preparing for this potential shift. Nomura Asset Management has established a cross-division task force to strategize product development for a post-regulatory environment. Daiwa Asset Management is collaborating with ETF specialist Global X Japan. Mitsubishi UFJ Asset Management and Amova Asset Management are also actively evaluating their fund offerings for both retail and institutional clients.
Asset managers are addressing practical considerations such as establishing reliable pricing benchmarks, ensuring rapid acquisition capabilities to meet investor demand, and implementing robust custody and security systems. The inherent volatility of digital assets remains a key concern that these firms are working to mitigate.
In parallel, the Financial Services Agency (FSA) is developing new regulations that will apply to 105 cryptocurrencies listed domestically. This includes major assets like Bitcoin (BTC) and Ethereum (ETH), which will be treated as financial products subject to insider trading laws, further integrating them into the established financial regulatory framework.