According to reports, the Japanese government is supporting a plan to significantly reduce the highest tax rate on cryptocurrency profits in the country, implementing a unified tax rate of 20%.
The Financial Services Agency (FSA) of Japan first proposed the tax changes in mid-November, outlining plans to submit a bill in early 2026, and now the government and the ruling coalition—parties controlling the Diet—have also expressed support.
According to a report by the Japanese news media Nikkei Asia on Sunday, the new rules aim to align cryptocurrency tax regulations with those of other financial products, such as stocks and investment funds.
Under current law, cryptocurrency trading taxes are classified as part of personal and corporate income tax, falling under the "miscellaneous income" category. Tax rates range from a low of 5% to a high of 45%, with high-income earners potentially subject to an additional 10% resident tax.
Meanwhile, assets like stocks and investment trusts are taxed separately, regardless of the amount, with profits uniformly taxed at a rate of 20%.
The tax changes could be a boon for the domestic cryptocurrency market, as higher tax rates may have deterred potential investors.
According to Nikkei, the potential changes to cryptocurrency taxation in Japan will be introduced as part of the "robust investor protection framework" proposed in the FSA bill, which aims to amend the Financial Instruments and Exchange Act.
The FSA plans to submit the bill during the regular Diet session in 2026, as it pushes for stricter regulations on cryptocurrency trading, including a ban on trading based on non-public information and stricter investment disclosures.
The Japan Blockchain Association (JBA) is the country's main non-governmental lobbying group focused on cryptocurrency, which has been advocating for these changes for the past three years.
In July 2023, the JBA published a letter to the government on its website outlining key tax reform demands to support the industry, calling for a consistent 20% tax rate in line with other investment tools.
The letter stated, "This letter calls for a review of cryptocurrency asset taxation, which is the biggest obstacle faced by companies operating Web3 businesses in Japan and a hindrance to the public's active ownership and use of cryptocurrency assets."
While it is unclear whether the JBA directly influenced the FSA's thinking, the financial regulator has indeed begun to accept this idea and push for reform starting in September 2024.
Related: Japan's bond yields rise, potentially shaking global carry trades and cryptocurrency
Original text: “Japanese government supports 20% tax rate on cryptocurrency profits, equal to stocks”
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