The plan would bring cryptocurrency taxation in line with stock investments, marking one of the most significant shifts in Japan’s approach to digital assets to date.

Under the proposal, profits from trading cryptocurrencies would be separated from regular income and instead taxed at a flat 20% rate.

This represents a sharp break from the current framework, where crypto earnings are treated as “miscellaneous income” and can face progressive tax rates of up to 55%. Industry groups have also urged the government to allow a three-year carry-forward on trading losses, similar to equity markets.

If approved, the new system would not only simplify reporting for retail traders but also encourage corporate involvement in Japan’s digital asset sector. The FSA is pairing the tax reform with a separate bill that would reclassify crypto under the Financial Instruments and Exchange Act.

This change would move digital assets away from being considered a mere payment method under the Payment Services Act and instead recognize them as legitimate financial products, clearing the way for domestic crypto ETFs.

The timing is deliberate. Japan has been striving to position itself as a leader in digital finance, especially as global competition heats up. Regulators are also moving toward approving the nation’s first yen-backed stablecoin, JPYC. Issued by Tokyo-based fintech JPYC Inc., the token is targeting issuance of 1 trillion yen (roughly $6.8 billion) over three years.

Taken together, these measures highlight a broader strategy: attract institutional players, create a more competitive tax environment, and cement Japan’s role as a major crypto hub in Asia.

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Filed under: Bitcoin - @ August 24, 2025 5:01 pm