In a significant move that could reshape the nation’s digital asset landscape, Japan’s Financial Services Agency (FSA) is evaluating a pivotal shift in how cryptocurrency holdings are taxed. According to a recent report by CoinDesk, the FSA is exploring whether personal cryptocurrency holdings should be classified as financial assets for tax purposes—a change that could substantially ease the tax burden on individual investors.
This proposal was outlined in the FSA’s recently released tax reform plan for the 2025 fiscal year. The document states:
"Regarding the tax treatment of cryptocurrency transactions, it is necessary to consider whether crypto assets should be treated as financial assets available for public investment."
If approved and enacted into law, this reclassification would mark a turning point in Japan’s evolving stance on digital currencies. Currently, crypto investment gains in Japan fall under the category of “miscellaneous income,” which subjects investors to progressive income tax rates. For high earners—those with annual incomes exceeding 40 million JPY (approximately $276,000)—the tax rate can reach as high as 45%. In contrast, capital gains from stock investments are taxed at a flat rate of just 20%, creating a stark disparity in tax treatment between traditional and digital assets.
👉 Discover how a fairer tax framework could unlock trillions in crypto value.
Why This Tax Reform Matters
The proposed change isn’t merely about lowering taxes—it reflects a broader strategic vision. The FSA recognizes that crypto assets have the potential to expand wage opportunities and contribute to household wealth creation. However, the agency also acknowledges that retail investor adoption remains limited, largely due to regulatory and tax uncertainties.
By aligning crypto taxation with that of stocks, Japan could foster greater confidence among individual investors. A more predictable and equitable tax environment may encourage wider participation, driving liquidity and innovation within the domestic crypto ecosystem.
This reform would require approval from both the House of Representatives and the House of Councillors before becoming law. While legislative passage isn’t guaranteed, the momentum behind pro-crypto policy changes in Japan has been growing steadily over the past two years.
A Broader Trend of Regulatory Modernization
Japan has been gradually modernizing its regulatory framework to support the growth of blockchain and digital asset technologies. Beyond potential tax reforms, several key policy shifts have already taken place:
- Stablecoin deregulation: Japan lifted restrictions on yen-pegged stablecoins, allowing licensed financial institutions to issue them. This move aims to improve payment efficiency and financial inclusion.
- Corporate tax relief: In a notable update last year, Japan’s National Tax Agency revised its interpretation of corporate tax rules. Now, crypto issuers are no longer required to pay a 30% corporate tax on unrealized gains—removing a major disincentive for businesses operating in the space.
These changes signal a coordinated effort to position Japan as a forward-thinking hub for fintech and digital finance innovation.
Industry Leaders Urge Reform
The call for fairer crypto taxation isn’t coming solely from regulators. Industry executives have long criticized the current system as outdated and counterproductive.
Genki Oda, CEO of cryptocurrency exchange BITPoint, has been vocal about the issue. He described Japan’s existing tax policies as “crazy and wrong,” arguing that parity with stock taxation would revitalize the market. Oda estimates that such a reform could bring back 10 to 20 trillion JPY ($88–175 billion USD) into Japan’s crypto markets—funds that have either moved overseas or remained on the sidelines due to unfavorable tax conditions.
This sentiment echoes across the industry: when innovation outpaces regulation, capital follows more accommodating jurisdictions. Japan risks losing talent, investment, and technological leadership if it fails to adapt.
👉 See how global markets are adapting to crypto-friendly tax policies.
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Frequently Asked Questions (FAQ)
What does it mean to classify crypto as a financial asset?
Classifying cryptocurrency as a financial asset means treating it similarly to stocks, bonds, or mutual funds for legal and tax purposes. This typically results in more favorable tax treatment, such as flat capital gains rates instead of progressive income tax brackets.
How would this affect individual crypto investors in Japan?
If implemented, investors could see their crypto gains taxed at a flat rate—likely around 20%—instead of being pushed into higher income tax brackets. This would reduce overall liability, especially for active traders and high-net-worth individuals.
Is this tax reform guaranteed to pass?
No. While the FSA has proposed the idea as part of its 2025 tax reform plan, it must still gain legislative approval from both houses of Japan’s Diet (parliament). The final decision rests with lawmakers and may be influenced by broader economic conditions.
How does Japan’s current crypto tax policy compare to other countries?
Japan’s current treatment of crypto as miscellaneous income is among the stricter approaches globally. Countries like Portugal, Singapore, and Germany offer more favorable regimes—some with zero capital gains tax on long-held crypto—making them attractive alternatives for investors.
Could this boost Japan’s crypto market?
Yes. A fairer tax system could attract both domestic and international capital. Lower barriers to entry and clearer rules often lead to increased trading volume, startup formation, and institutional involvement—all signs of a healthy, growing market.
What other countries treat crypto like stocks for tax purposes?
Several jurisdictions apply securities-like or investment asset frameworks to crypto. The U.S., for example, treats crypto as property, subject to capital gains rules. Canada and Australia also use capital gains models. Aligning with these standards would bring Japan closer to global norms.
👉 Explore how modern tax frameworks are shaping the future of digital finance.
Final Thoughts
Japan stands at a crossroads. With thoughtful reforms like reclassifying crypto as a financial asset, it has the opportunity to reignite investor confidence and reclaim its position as a leader in financial innovation. The proposed tax changes go beyond fiscal policy—they represent a recognition that digital assets are not a fringe trend but a core component of tomorrow’s economy.
As global attitudes toward cryptocurrency continue to mature, regulatory clarity and fairness will determine which nations thrive in the new digital era. For Japan, getting this right could unlock trillions in economic value and set a precedent for responsible, forward-looking governance.
The world will be watching closely as Tokyo debates its next move.