The Japanese government will significantly revise its digital asset (virtual asset) tax system starting next year. The key goal is to lower the current tax rate, which currently stands at a maximum of 55%, to around 20%. However, the market is focusing its attention on the possibility that only core assets like Bitcoin and Ethereum, rather than all virtual assets, will be subject to the revision.
This revision is being discussed toward separating virtual assets from the existing "other income" category and reclassifying them under a tax system closer to financial investment assets. Currently, in Japan, profits from virtual asset trading are subject to comprehensive taxation, with a maximum tax rate of 55% depending on the income bracket. This has led to persistent criticism that individual investors and startups have relocated overseas.
If the reform is realized, Bitcoin and Ethereum will transition to a separate taxation system similar to stocks, with a lower tax rate of 20%. This will dramatically improve the digital asset investment environment in Japan. Some market observers are even calling this a "virtually declaration of institutional incorporation."
However, the scope of application is expected to be limited. Japanese financial authorities are cautious about blanketly including altcoins, which are highly volatile and have unclear realities. Accordingly, a plan is likely to be implemented first, focusing on assets with proven market capitalization and global liquidity, such as Bitcoin and Ethereum, with a gradual expansion thereafter.
This tax reform is interpreted as a signal that Japan is shifting its focus toward becoming a "virtual asset-friendly nation." Japan has been actively pursuing regulatory reforms, including institutionalizing stablecoins, easing tax rates for Web3 companies, and establishing a dedicated organization within the Financial Services Agency. If these tax burden reductions are added, Japan's potential for re-emergence as a digital asset hub in Asia will increase.
The market is also paying attention to the contrast with Korea, which continues to experience a cycle of virtual asset tax deferrals and system design. There are speculations that Japan's latest decision could spark competition among major Asian countries regarding digital asset taxation.
Japan's abrupt shift from 55% to 20% is not simply a tax rate adjustment; it represents a significant shift in the country's perspective on virtual assets. The key question now is which assets, and to what extent, will be brought under the regulatory framework.
