The Liberal Democratic Party, which rules the Japanese political scene, is pushing for immediate tax reforms in the cryptocurrency sector. A recent statement highlighted that the party's web3 project team presented a strategic document, called the “White Paper”, on April 12, signaling a robust movement towards favorable regulatory adjustments.
This initiative follows the government's February announcement that it plans to allow venture capital funds to invest in local cryptocurrency companies, marking a significant step towards strengthening the crypto ecosystem in the country. The web3 project team emphasized the need to treat the “profits and losses” of cryptoactive transactions with a specific tax regime based on self-assessment, highlighting the urgency of this reform. The report has already been sent to the party's Digital Society Promotion unit.
Currently, cryptocurrency traders in Japan are required to declare their cryptocurrency trading profits and losses as “other income” on their annual income statements. This results in a tax burden that can vary significantly, with low-income individuals paying around 11% while those in higher brackets can face rates in excess of 50%.
Unlike many countries where cryptocurrency profits are taxed as capital gains, Japan has faced continued pressure from activists seeking an overhaul of these policies. These voices have gained an ally in Prime Minister Fumio Kishida, whose administration has recently shown a pro-web3 approach, including reforms that have already benefited companies by abolishing taxes on unrealized gains.
If the Digital Society Promotion unit supports tax reform for sole traders, it will pass to the party's Political Affairs Research Council. If approved, this reform will be adopted as official policy of the Liberal Democratic Party, allowing lawmakers to introduce a bill into the National Diet.
Proponents of the white paper seek to position Japan as a leader in the web3 revolution, emphasizing support for the development of the technology blockchain in social infrastructure projects. The proposed changes include, in addition to the separation of taxation of crypto profits, the possibility of deferring losses for up to three years, an adjustment that could ease the burden on traders during downturns.
The Japanese cryptocurrency industry welcomed the news. Sota Watanabe, CEO of Astar Network and Startale Labs, commented: “The article comprehensively covers the main issues that the industry considers to need improvement.”
