Japan is taking a significant step in reforming its cryptocurrency tax policy, as major parties in the ruling coalition announced a proposal to create a separate tax system for digital assets. According to the 8th Reiwa tax reform guidelines, announced on December 19th by the Liberal Democratic Party and the Innovation Party of Japan, the government wants to officially recognize cryptocurrencies as a financial product Vai to national wealth creation, rather than continuing to classify them as "secondary" income as before.
According to the proposal, cryptocurrency transactions on the spot market, Derivative transactions, and cryptocurrency-related ETFs would be subject to a separate tax mechanism, operating similarly to how Japan applies it to stocks and other traditional financial products. A point of particular interest to investors is that losses from crypto transactions would be allowed to be carried forward for up to three years, significantly reducing the tax burden during periods of high market volatility, a characteristic of the digital asset sector.
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However, this reform does not cover all activities related to cryptocurrencies. Forms such as Staking or lending will likely continue to be subject to the current tax mechanism, which is considered less flexible. Meanwhile, Non-Fungible Token are not specifically mentioned in the proposal, meaning that Non-Fungible Token transactions in Japan will likely remain classified as other income and be subject to higher taxes than stocks or spot cryptocurrencies.
