Japanese Finance Minister: Tokyo Will Review Crypto Tax System ‘by June’
Japanese Finance Minister Katsunobu Kato has promised that Tokyo will review the nation’s controversial and much-maligned crypto tax laws by the end of June this year. Kato made this announcement during a plenary session of the House of Representatives on the 31st, according to the House of Representatives’ official website and a report from the Japanese-language media outlet Iolite.
Kato’s statement came in response to a question from Akihisa Shiozaki, a lawmaker from the ruling Liberal Democratic Party (LDP) and the head of the party’s Web3 Digital Society Promotion office. Kato explained that the Financial Services Agency (FSA) will conduct the review based on the LDP’s tax system proposals. He also mentioned that the review will include recommendations for necessary legislative amendments.
Prime Minister Shigeru Ishiba also expressed his belief that crypto assets will contribute to solving Japan’s social problems and improving productivity. He emphasized the importance of the healthy development of web3, including crypto assets, and the need for the government to ensure user protection and improve the environment of the domestic crypto market.
Kato further revealed that the FSA will outline its proposed changes to the nation’s tax authorities to ensure that any necessary changes are implemented before the new rules are enforced. He also suggested that Tokyo is prepared to alter the legal definition of crypto assets. Currently, Japanese law defines crypto as a type of payment instrument, but Kato stated that in reality, coins like Bitcoin are mainly traded for investment purposes. He added that the FSA intends to gather a wide range of opinions before making an official recommendation on the appropriateness of crypto’s current legal status.
Since 2017, when the FSA began regulating the Japanese crypto market, the agency has had the final say on all related regulations. While the LDP has formulated basic crypto policy, it is the FSA that has developed regulations and legal amendments. All proposals and requests made by the FSA to parliament on this matter have been promptly adopted.
Prior to Ishiba, his predecessor Fumio Kishida took a relatively progressive stance on crypto regulation. However, Ishiba has been more cautious about tax reform, although he has also made conciliatory comments about crypto and blockchain. Shiozaki’s department has called for faster action, emphasizing the urgent importance of their proposal to reform crypto tax.
Japanese tax laws currently require crypto traders to report their profits on their yearly income tax returns. This differs from many other countries that impose flat capital gains levies on traders. Japanese traders must file their crypto trading profits as “other income” on their annual tax returns, which means that the wealthiest crypto traders in Japan may have to pay up to 55% of their trading profits to the Treasury.
Many critics and Japanese crypto investors argue that the Japanese crypto market is over-regulated, which has hindered the growth of the web3 and crypto sectors. The FSA is reportedly considering amending the Payment Services Act to include crypto as an asset class under the terms of the Financial Instruments and Exchange Act. If true, this indicates that the FSA and the Japanese Finance Minister are now aligned in their stance on reform.
