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 just 20%. This initiative also seeks to classify digital assets as a distinct asset class, separate from traditional securities under the Financial Instruments and Exchange Act.

New Classification for Cryptocurrencies

According to LDP lawmaker Akira Shiizaki, this proposed reform signifies a pivotal shift in Japan’s approach to digital assets. By categorizing cryptocurrencies as a new asset class, the LDP aims to foster a more favorable environment for crypto investments. This move is particularly significant as it aligns with the global trend of recognizing the importance of digital currencies in modern finance.

Tax Treatment for Crypto Derivatives

The LDP’s proposal extends beyond mere classification. It also requests that cryptocurrency derivatives trading receive the same tax treatment as spot investments. Furthermore, the party has suggested deferring taxes on crypto-to-crypto swaps. Instead of taxing these transactions immediately, the LDP proposes that taxes be calculated collectively and only applied when the cryptocurrency is exchanged for fiat currency.

Japan’s Evolving Stance on Cryptocurrencies

These regulatory reforms indicate a significant shift in Japan’s stance towards cryptocurrencies, moving away from a previously cautious approach to digital asset investment. Historically, Japan has maintained a balanced regulatory framework that seeks to encourage innovation while ensuring consumer protection. The government has never explicitly opposed cryptocurrencies, but rather has taken a measured approach to their regulation.

In November 2024, the Japanese government committed to ongoing crypto tax reform, with the LDP actively seeking input on these reforms until March 31, 2025. This extended timeline allows for a thorough examination of the potential impacts of these changes on the market and investors.

Future Considerations for Bitcoin Adoption

In a related development, 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 has expressed caution, stating that Japan currently lacks sufficient insight into the US Bitcoin movement to make a definitive decision.

Regulatory Oversight and Exchange Registration

In February 2025, Japan’s Financial Services Agency (FSA) took proactive steps by requesting major tech companies like Google and Apple to enhance their regulatory compliance in the region. This initiative aims to ensure that cryptocurrency exchanges operating in Japan are registered with the appropriate regulatory authorities, thereby reinforcing consumer protection and market integrity.

As Japan continues to navigate the complexities of cryptocurrency regulation, these proposed reforms signal a willingness to adapt to the evolving landscape of digital assets. By reducing the capital gains tax on cryptocurrencies and reclassifying them as a distinct asset class, Japan is positioning itself as a more attractive destination for crypto investors.

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