Japan Proposes Major Crypto Tax Cut as Industry Awaits Regulatory Shift

• Japan’s ruling LDP proposes reducing the cryptocurrency tax rate from 55% to 20%, aiming to boost regulatory clarity and industry growth.
• The proposal seeks to reclassify crypto under the Financial Instruments and Exchange Act, removing it from the Payment Services Act framework.
• The FSA is reviewing crypto regulations, including a potential lift on the ETF ban, with discussions expected to continue into 2025.

In a bid to support the growth of the cryptocurrency market in the country, the ruling party, the LDP, has launched a bill that wants to reduce the current tax on crypto gains. It proposes to bring down the current 55% taxation of crypto gains and prevent the mining use of electricity.

LDP’s Proposal on Crypto Taxation

The draft, released by LDP lawmaker Akihisa Shiozaki, suggests reclassifying cryptocurrencies as a separate asset class under the Financial Instruments and Exchange Act. This change would shift them away from their current classification under the Payment Services Act. The move aims to provide clearer tax regulations and a structured framework for the crypto industry.

Under the proposed classification, cryptocurrencies would not be treated as securities but as distinct financial products. This adjustment is expected to enhance regulatory clarity and align tax policies with industry needs. According to industry executives, the shift could contribute to increased crypto adoption in Japan.

Industry Reaction and Government Engagement

Sota Watanabe, CEO of Web3 infrastructure company Startale, called the proposal a significant step for Japan’s crypto sector. He stated that discussions between the government and industry leaders had played a role in shaping the policy. Watanabe expressed confidence that the tax changes would lead to broader participation in the crypto market.

Japan’s government has been taking a structured approach to digital asset regulations. In December 2024, Prime Minister Shigeru Ishiba addressed a separate initiative regarding Bitcoin reserves. He expressed skepticism about accumulating Bitcoin as a national asset, citing limited information on global strategies.
Japan is also considering the possibility of a Bitcoin reserve. Satoshi Hamada, a member of the House of Councilors, submitted a proposal in December 2024 for converting part of Japan’s foreign reserves into Bitcoin. While the legislature acknowledged receipt of the request, further deliberations remain ongoing.