Japan plans to reform its crypto tax system starting in fiscal year 2026, placing Spot Trading, Derivative , and crypto ETFs/trusts under a separate 20% tax rate, replacing the Capital "other income" tax system which is considered disadvantageous to investors.
The reform outlines released by major parties on December 19th show that crypto is being viewed as a financial product for wealth accumulation. However, this change does not apply uniformly across the entire Web3, creating significant differences between various types of activities and assets.
- Japan aims to implement a separate 20% tax on spot, Derivative , and crypto ETFs/trusts starting in fiscal year 2026.
- Staking, lending, and Non-Fungible Token can still be classified as "other income," subject to taxation at the time of receipt, potentially at a rate of up to 55%.
- The international trend is towards a clearer regulatory framework, but this comes with stricter transaction reporting requirements and tax risks when leaving the country.
Japan's crypto tax reform in fiscal year 2026 repositions crypto as a financial product.
The proposed reforms aim to reclassify crypto from a "speculative instrument" to a "financial product for wealth creation," thereby prioritizing certain activities with a separate 20% tax rate instead of the previous comprehensive tax mechanism.
According to the draft, the policy direction emphasizes the Vai of crypto in wealth accumulation, bringing Japan's approach closer to the tax framework applied to stocks and foreign exchange. This move directly responds to the long-standing desire of the Japanese crypto community to end the era of "miscellaneous income".
The framework document, released by Japan's Liberal Democratic Party (LDP) and the Japan Restoration Party (XEM the announcement ), is described as a fundamental shift in how the country treats digital assets.
Spot, Derivative , and crypto ETFs/trusts are among the beneficiaries of the 20% tax rate.
The groups that will benefit most include Spot Trading, Derivative , and crypto ETFs/trusts, which are expected to transition to a separate tax system with a fixed tax rate of 20%.
This priority area is described as a “green zone,” where policy aims to standardize taxation to be similar to traditional financial products. The key point is that the application is selective, focusing on activities with clearer transaction/reporting frameworks.
If implemented as outlined, the new tax structure could reduce the variability of tax obligations between years for the group of investors who primarily Spot Trading products and Derivative recognized within the system.
The 3-year loss carryforward mechanism brings crypto taxes closer to those on stocks and FX.
Traders in the groups subject to the 20% tax will have a loss carryforward mechanism for 3 years, allowing them to use past losses to offset future profits.
The loss carryforward rule is a key point because it allows for taxing based on investment results over multiple periods, rather than "losing" the right to offset losses when the market reverses. This is also a familiar approach in the securities/FX sector, which can increase predictability and fairness for professional investors.
However, this benefit is tied to the scope of assets/activities approved under a separate tax mechanism, rather than being automatically applied to all Web3 activities.
Staking, lending, and Non-Fungible Token may still be taxed as "other income" at up to 55%.
Reforms are not applied uniformly: Staking rewards, lending yields, and Non-Fungible Token are still XEM “other income,” subject to immediate taxation, and the tax rate can be as high as 55%.
This treatment creates a significant discrepancy between “transactions” and “income generated from operations,” especially for investors participating in DeFi or yield-generating strategies. Calculating taxes at the time of receipt also increases the complexity of Capital accounting, as it requires separating the value of the reward received from the accumulated purchase price.
In practice, investors may need to closely track the timing of receipt, the valuation at the time of receipt, and the relationship to subsequent transactions to avoid discrepancies during settlement.
"Specified Crypto Assets" may limit the range of assets eligible for the 20% tax rate.
Japan is expected to add a classification of “Specified Crypto Assets”; if it primarily applies to Token listed on exchanges registered under Japanese financial law, traders of unlisted altcoins/ DeFi may not qualify for the 20% tax.
While the final definition has not yet been finalized, the current description suggests a focus on Token traded in a tightly regulated environment, particularly on exchanges falling under the purview of the Financial Instruments and Exchange Act.
As a result, although both are cryptocurrencies, two different tax regimes can arise: one side enjoys a separate 20% tax, while the other continues to be subject to a heavier aggregate tax mechanism, depending on whether the Token/protocol falls within a "designated zone".
Hidden risks: failure to offset crypto losses against stock gains and the possibility of Exit Tax.
Even with favorable terms, crypto losses are not offset against stock gains; moreover, treating crypto as a financial product could pave the way for Exit Tax to target unrealized profits when investors move their holdings abroad.
The principle of "separation by asset class" reinforces the approach of independent taxation between crypto and the stock market. This directly impacts portfolio allocation strategies, as investors cannot use crypto losses to reduce their tax obligations from stock gains.
Simultaneously, as crypto is placed closer to traditional financial products, the possibility of taxing unrealized interest in the context of changing tax residency could become a major policy topic in the future.
Standardizing transaction reporting and PnL data requirements will tighten compliance.
The government may require exchanges to submit unified transaction reports directly, reducing the likelihood of manual reporting; investors should prepare historical records and profit/loss (PnL) tracking tools early on.
When a centralized reporting mechanism is implemented, the completeness of transaction data will become a decisive factor in calculating taxes correctly. This is especially important in cases with multiple sources of asset formation such as buying/selling, transferring between exchanges, receiving bonuses, Airdrop , or interest income.
The outline emphasizes the need to separate the cost of Capital purchased and the value of the reward at the time of receipt. This preparation helps reduce the risk of discrepancies when the fiscal year 2026 rules come into effect.
Many countries are also accelerating their crypto regulatory frameworks towards 2026.
Hong Kong finalized the ASPIRe framework, Russia moved to a tiered system for legalizing digital asset ownership, and Europe moved toward greater transparency with MiCA fully effective in July 2026 and DAC8 starting in January.
Overall, these developments indicate that the global crypto market is shifting from a “legal winter” to a more structured, transparent, and institutionally-led cycle. For investors, this trend typically comes with two sides: opportunities to access compliant products (such as Crypto ETFs) and increasingly detailed compliance/reporting obligations.
Conclusion: Significant progress has been made, but asset class remains Shard .
Japan's tax reforms signal that crypto is being recognized as a genuine financial product, but the selective application of tax regulations based on activity and asset type suggests that regulators remain cautious about Web3.
- The shift to a separate 20% tax for certain sectors is a significant step forward compared to the "other income" mechanism.
- The Shard between spot/ Derivative /crypto ETF Spot Trading and Staking/lending/ Non-Fungible Token trading can lead to significant differences in tax obligations between strategies.
Frequently Asked Questions
What are the biggest changes to Japan's 2026 crypto tax reform?
The biggest change is that some crypto segments, such as Spot Trading, Derivative , and crypto ETFs/trusts, are expected to be taxed separately at a rate of 20%, instead of being taxed as "other income" under the general tax mechanism.
Which activities might still be XEM "other income" and subject to high taxes?
Staking rewards, lending yields, and Non-Fungible Token are stated to still be treated as “other income,” subject to taxation at the time of receipt, with tax rates potentially reaching up to 55% depending on the tax bracket.
What does "Specified Crypto Assets" mean for altcoin and DeFi investors?
This is a new classification; the final definition is yet to be finalized, but it seems to prioritize Token listed on exchanges registered under Japan's legal framework. If so, unlisted altcoins operating through decentralized protocols may not qualify for the 20% tax rate.
Can investors use crypto losses to offset stock gains?
No. The reform emphasizes that crypto losses cannot be offset against stock market gains, reflecting a separate tax system based on asset classes.
Why should you start preparing trading data and monitoring PnL now?
Due to the unified transaction reporting guidelines from the exchange and the requirement to separate the Capital basis of purchase from the reward value at the time of receipt, historical records and PnL tracking tools help ensure accurate settlement when the 2026 fiscal year regulations come into effect.
