A coalition of Japanese blockchain and crypto exchange companies has formally requested the government to revise coin-related tax policies. The Japan Blockchain Association (JBA), in an official release, urged Tokyo to implement these changes before the 2025 fiscal year.
The JBA pointed out that the current high tax rates on cryptocurrency profits are preventing Japanese citizens from effectively preserving valuable assets. The coalition advocated for applying the same tax rate to cryptocurrencies that is used for traditional financial assets, such as publicly traded stocks.
Among the JBA members are leading crypto and blockchain companies in Japan, including the bitFlyer exchange. The association announced last month that it will be pushing the government to relax the nation’s strict tax regulations and to implement new tax policies in the upcoming year. It also noted that the current tax laws governing crypto transactions are unduly complicated and that many prospective cryptocurrency investors are discouraged by Japan’s progressive tax structure.
In contrast to most countries where crypto traders face a flat-rate capital gains tax on annual profits, Japanese law requires traders to declare token-derived profits under the “other income” category on their tax returns. Consequently, high earners can face taxes of up to 55% on their crypto earnings, a rate significantly higher than those in other major economies, the JBA noted.
The JBA, along with other industry associations, has previously succeeded in pushing for reforms to corporate cryptocurrency tax laws. As a result, Japanese companies are exempt from paying taxes on their unrealized cryptocurrency holdings. Legislators have also shown an interest in changing individual citizen tax rates; many of them are in support of taxing cryptocurrency revenues like capital gains.
According to the JBA, the current crypto tax laws adversely affect Web3 startups and Japanese companies issuing crypto assets. The JBA warned that without reform, Japan could fall behind other countries in the competitive Web3 sector, leading to a potential exodus of skilled personnel and startups seeking more favorable regulatory environments.
The JBA’s proposals to Tokyo include:
- establishing distinct self-assessment tax regimes for cryptocurrencies and eliminating them from the “other income” segment of yearly tax returns
- setting a flat 20% tax rate for profits from cryptocurrencies
- permitting traders to deduct losses from earnings from cryptocurrency investments for a period of three years
- doing away with taxes on transfers between cryptocurrencies
- putting in place a mechanism for tax-deductible or tax-free cryptocurrency donations
- Ttking into account upcoming changes to tax laws on cryptocurrency derivative transactions.
The need for tax reforms aside, Japan’s environment shows how an industry can be sure-footed in its growth if the regulations governing it are clear. Companies that are operating in the United States, such as Bit Digital Inc. (NASDAQ: BTBT), hope a time will come when a clear regulatory framework is also enacted to bring stability to the industry.
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