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 Asset Class for Cryptocurrencies

According to LDP lawmaker Akira Shiizaki, this proposal marks a significant shift in Japan’s approach to digital assets. By categorizing cryptocurrencies as a new asset class, the LDP aims to create a more favorable environment for crypto investments. This change is expected to attract both domestic and international investors, fostering innovation in the burgeoning digital asset market.

Tax Treatment for Crypto Derivatives

The LDP’s proposal goes beyond just capital gains tax reduction. 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 individually, the LDP proposes that taxes be calculated collectively and only charged when the cryptocurrency is exchanged for fiat currency.

Japan’s Evolving Stance on Cryptocurrencies

This regulatory reform signals a notable shift in Japan’s stance towards cryptocurrencies. Historically, the country has maintained a cautious approach to digital asset investments, often prioritizing consumer protection while balancing innovation. However, with this new proposal, Japan appears to be opening its doors wider to the crypto market.

The government has never explicitly opposed cryptocurrencies, opting instead for a measured regulatory framework. In November 2024, Japan committed to ongoing crypto tax reform, with the LDP actively seeking input on these reforms until March 31, 2025. This engagement with stakeholders indicates a willingness to adapt and evolve in response to the rapidly changing landscape of digital assets.

Future Considerations for Bitcoin

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 by December 2024. However, Prime Minister Shigeru Ishiba responded cautiously, stating that Japan lacks sufficient insight into the US Bitcoin movement to make a definitive decision.

Regulatory Oversight and Exchange Operations

More recently, in February 2025, Japan’s Financial Services Agency (FSA) took proactive steps by requesting major tech companies like Google and Apple to ensure that cryptocurrency exchanges operate within the regulatory framework established by Japanese authorities. This move underscores the government’s commitment to maintaining a secure and regulated environment for digital asset trading.

As Japan navigates this evolving landscape, the proposed tax reforms and regulatory changes could significantly impact the future of cryptocurrency investments in the country. Investors and stakeholders are closely monitoring these developments, eager to see how Japan’s regulatory framework will shape the digital asset market.

For more detailed information, you can read the original article here.