Japan’s Ruling Party Proposes 20% Tax Cut on Crypto Gains

In a groundbreaking move, Japan’s Liberal Democratic Party (LDP), the dominant force in Japanese politics, is advancing a comprehensive regulatory reform aimed at slashing the capital gains tax on cryptocurrencies to a mere 20%. This initiative not only seeks to reduce the tax burden on crypto investors but also aims to classify digital assets as a distinct asset class, separate from traditional securities.

New Classification for Cryptocurrencies

According to LDP lawmaker Akira Shiizaki, cryptocurrencies will be categorized under a new asset class, distinct from securities as defined by the Financial Instruments and Exchange Act. This change is expected to provide clearer guidelines for investors and pave the way for more robust participation in the crypto market.

Tax Treatment for Crypto Derivatives

The LDP’s proposal extends beyond just capital gains tax. It also advocates for cryptocurrency derivatives trading to receive the same favorable tax treatment as spot investments. Additionally, the party has proposed deferring taxes on crypto-to-crypto swaps, suggesting that taxes from these transactions should be calculated collectively and only applied when the crypto is converted into fiat currency.

Japan’s Evolving Stance on Cryptocurrencies

This regulatory reform indicates a significant shift in Japan’s approach to cryptocurrencies, moving away from a previously cautious stance towards a more open and encouraging environment for digital asset investment. Historically, Japan has maintained a balanced regulatory framework that seeks to foster innovation while ensuring consumer protection.

In November 2024, the Japanese government committed to ongoing crypto tax reform, with the LDP actively seeking public input on these reforms until March 31, 2025. This collaborative approach aims to ensure that the new regulations meet the needs of both investors and regulatory bodies.

Future Considerations for Bitcoin Reserves

In a related discussion, Japanese lawmaker Satoshi Hamada has urged the legislature to explore the potential adoption of a strategic Bitcoin reserve in the United States. However, Prime Minister Shigeru Ishiba expressed caution, stating that Japan currently lacks sufficient insight into the US Bitcoin movement to make informed decisions.

Regulatory Engagement with Tech Giants

In February 2025, Japan’s Financial Services Agency (FSA) took proactive steps by requesting major tech companies like Google and Apple to enhance their engagement with registered cryptocurrency exchanges in the region. This move is part of Japan’s broader strategy to ensure that its regulatory framework remains relevant and effective in the rapidly evolving digital asset landscape.

As Japan continues to refine its approach to cryptocurrencies, the proposed tax reforms and regulatory changes signal a commitment to fostering a more vibrant and competitive crypto market. Investors and stakeholders are closely monitoring these developments, as they could significantly impact the future of cryptocurrency investment in Japan.

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