The Japanese Financial Services Agency (FSA) is proposing a major change in how cryptocurrencies are taxed and classified. This change could open the door to cryptocurrency exchange-traded funds (ETFs) in the country and apply a flat 20% tax rate on profits from digital assets.
The proposal recommends treating cryptocurrencies as financial products under Japan’s FIEA, which are the same rules that apply to stocks and bonds. Currently, crypto profits are taxed under a progressive system, with rates going as high as 55%. Switching to a standard 20% tax would align crypto with stock investments and could attract more investors, from everyday traders to large financial institutions.
The reclassification is part of a wider government initiative dubbed “New Capitalism,” which aims to drive economic growth through investments. The move signals Japan’s intent to become a leader in digital finance.
Interest in crypto is growing in Japan. The FSA noted that over 12 million people in the country had active crypto accounts, holding over $34 billions’ worth of digital assets. Crypto ownership exceeds participation in more traditional products like corporate bonds and foreign exchange trading, especially among tech-savvy individuals.
Globally, institutional interest in cryptocurrencies is also increasing. The FSA pointed to more than 1,200 major financial firms that have added U.S. Bitcoin spot ETFs to their portfolios. The country hopes to mirror these developments by creating a supportive environment for similar products.
In addition to the proposed reclassification, the FSA has introduced a draft framework to organize crypto assets into two main types. The first category includes tokens created to raise funds or support business operations. These would come with tougher transparency and reporting requirements. The second group includes decentralized tokens like Ethereum and Bitcoin, which would mainly be regulated through trading platforms rather than through strict disclosure rules.
The country is also exploring the future of stablecoins. In April, firms including Fireblocks, TIS Inc., and Ava Labs signed an agreement to research how stablecoins could be launched and used in the country. Their focus includes issuing stablecoins tied to the Japanese yen and the USD, as well as using them for settling digital versions of traditional assets like real estate and stocks.
Japan also made headlines in March when it issued its first stablecoin license to SBI VC Trade, a branch of the financial giant SBI. Meanwhile, Japan’s pilot program for a digital yen, which began in 2023, is actively moving forward as the country pushes ahead in building its digital finance infrastructure.
As more countries like Japan reform their laws to accommodate crypto investments, firms like Cantor Equity Partners Inc. (NASDAQ: CEP) could have a broader field to select from as they expand their portfolio of digital assets.
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