Japan slashes crypto taxes to 20% amid regulatory shift

Japan's ruling Liberal Democratic Party (LDP) is pushing for a major regulatory overhaul that would lower the capital gains tax on cryptocurrencies to 20% and classify digital assets as a distinct asset class.

This initiative signals a shift in Japan’s approach to digital assets, aiming to foster market growth while ensuring investor protection by aligning crypto taxation with stocks and other financial instruments.

Under the proposed changes, cryptocurrencies would be regulated separately from securities under the Financial Instruments and Exchange Act, and crypto derivatives trading would receive the same tax treatment as spot investments.

A key aspect of the reform includes deferring taxes on crypto-to-crypto swaps until assets are converted into fiat currency, simplifying tax compliance for investors.

The proposal builds on Japan’s economic stimulus bill passed in November 2024, which committed to crypto tax reform, with public feedback open until March 31, 2025.

The move has been welcomed by the crypto community, as it could make Japan a more attractive destination for digital asset investments by lowering the current tax rate, which can be as high as 55%.

Despite this progress, Japan remains cautious about holding Bitcoin as a strategic reserve, with Prime Minister Shigeru Ishiba expressing uncertainty over U.S. Bitcoin policies.

Meanwhile, the Financial Services Agency continues to enforce strict regulations, recently urging Google and Apple to block unregistered crypto exchange apps that do not comply with local licensing requirements.

Japan’s evolving regulatory stance balances innovation with oversight, signaling a more open but controlled approach to digital assets.

The potential approval of spot crypto exchange-traded funds (ETFs) in Japan could further integrate cryptocurrencies into the country’s financial markets, expanding investment opportunities.