Key Developments in Crypto Tax Reform
- •Japan’s government supports cutting crypto tax rates to a flat 20%, aligning them with those for equities and investment funds.
- •The Financial Services Agency (FSA) plans to submit a reform bill in early 2026 as part of a broader investor-protection framework.
- •This move follows years of lobbying from the Japan Blockchain Association advocating for fairer tax treatment for cryptocurrencies.
Shifting Tax Landscape for Digital Assets
Japan is preparing to significantly reduce taxes on cryptocurrency profits. The government and its ruling coalition have now endorsed a proposal to implement a flat 20% tax rate on these gains. This represents a substantial change from the country's current tax system, where profits from cryptocurrencies are classified as "miscellaneous income" and can be subject to rates as high as 55% for high-income individuals.
Huge. The Japanese government has officially begun the process of adjusting the crypto tax rate to 20% and is trying to pass it in 2026. https://t.co/4eX7UBJrzR
— Sota Watanabe (@WatanabeSota) December 1, 2025
The Financial Services Agency (FSA) initially introduced the concept of crypto tax cuts in mid-November. According to a recent report from Nikkei Asia, the government is now fully in agreement with the regulator's initiative to simplify and modernize Japan's approach to cryptocurrency taxation.
Harmonizing Crypto Taxation with Traditional Investments
Under the current regulations, profits derived from cryptocurrency transactions are integrated into the overall income tax calculation, leading to a progressive tax rate ranging from 5% to 45%, with an additional 10% inhabitant tax. This system has been widely criticized for stifling investment and creating complexities in tax reporting for individuals and businesses.
In contrast, profits from equities and investment trusts are subject to a simplified 20% separate tax rate. The proposed reform aims to align the taxation of crypto profits with this more favorable structure.
This potential reform could invigorate Japan's digital asset sector. Analysts believe that the existing high tax burdens have been a significant deterrent to both retail investors and institutional participation in the cryptocurrency market.
FSA's 2026 Bill Includes Robust Oversight
The FSA is slated to present its reform bill during the ordinary Diet session in 2026. This legislation will extend beyond tax adjustments to incorporate comprehensive investor protection measures. These measures are expected to include prohibitions on trading based on material non-public information and more stringent disclosure requirements for market participants.
Government officials have stated that the objective is to establish a strong regulatory framework that is consistent with international standards, thereby making Japan a more attractive jurisdiction for cryptocurrency innovation.
Years of Industry Advocacy Yield Results
This proposed reform is the culmination of nearly three years of lobbying efforts by the Japan Blockchain Association (JBA). In a letter submitted in 2023, the JBA urged the government to transition crypto taxes to a flat 20% scheme, asserting that the current system poses a substantial obstacle for Web3 companies and individual users alike.
While the precise extent of the JBA's influence on this development is not fully clear, the FSA began indicating a willingness to consider reforms in late 2024, which has ultimately led to the current political momentum supporting the tax overhaul.