Japan's Financial Services Agency (FSA) is considering reclassifying cryptocurrencies to be taxed as financial assets rather than income.
In its tax reform proposal for the fiscal year 2025, the FSA noted:“We should evaluate whether cryptocurrency assets ought to be categorized as financial assets for public investments.”
If this regulatory change is enacted, high-income individuals with cryptocurrency gains could benefit from reduced tax rates. Currently, Japan taxes crypto profits as income, with rates ranging from 15% to 55%, depending on the individual's income bracket. The top rate of 55% applies to earnings exceeding 200,000 yen (roughly $1,377 USD).
In contrast, profits from securities trading, such as stocks, are subject to a maximum tax rate of 20%. Moreover, businesses holding cryptocurrencies in Japan are subject to a fixed 30% tax rate at the fiscal year’s end, regardless of whether they have realized any profits from selling those assets.
The report also highlights the potential for cryptocurrencies to boost household income and strengthen financial stability for families, although individual investors have not widely adopted them yet. However, 54% of fund managers in Japan have expressed interest in investing in cryptocurrencies within the next three years.
Government ministries are expected to submit the tax reform proposal to the ruling party, which will forward it to the tax system research committee and Japan’s parliament for consideration. The proposal will only be approved if both parliamentary houses agree.
In recent years, Japan has been rethinking its taxation approach for cryptocurrencies, as high tax rates have previously driven many crypto businesses out of the country. Last year, the government declared that companies issuing cryptocurrencies would no longer be taxed on unrealized gains.
The Japan Blockchain Association, a crypto advocacy group, urged the government to lower taxes on cryptocurrency assets in 2023. On July 19th, they also submitted a tax reform request for the 2025 fiscal year, seeking to revitalize Japan’s crypto sector. Their proposal includes a fixed 20% tax rate on cryptocurrencies and the option to deduct losses over a three-year period.
Despite these efforts, no significant policy changes have yet been implemented in Japan’s cryptocurrency industry.
