Japan is preparing a major shift in how it taxes cryptocurrency profits, aiming to introduce a flat 20 percent rate that would bring digital assets in line with stocks. The proposal, shaped by the Financial Services Agency, seeks approval for the 2026 fiscal-year tax reform. If passed, the plan would replace the current progressive tax structure that can reach 55 percent for high-earning traders.
Crypto Gains Treated Like Traditional Investments
The government wants to move crypto earnings out of the miscellaneous income category. By placing them under the Financial Instruments and Exchange Act, Japan would classify digital assets as financial products similar to equities and investment trusts. Officials expect about 105 cryptocurrencies, including Bitcoin and Ethereum, to fall under this new framework.
This shift would also introduce stricter standards for the crypto market. Investors would see rules such as mandatory disclosures and insider-trading restrictions. These changes mirror the requirements already used for traditional financial products, which could help build more trust among traders.
Reform Aims to Boost Domestic Crypto Activity
Supporters believe that a flat tax rate will encourage more participation from both retail and institutional investors. They argue that lower and more predictable taxes reduce hesitation among traders who currently face steep and inconsistent tax bills. As a result, Japan hopes to attract new investment and increase activity within its digital asset sector.
Key goals of the proposal include:
- Bringing tax rules for cryptocurrencies closer to those for stocks.
- Making crypto trading more appealing to long-term investors.
- Strengthening market transparency through stricter regulations.
New Investment Products Could Follow
Regulators also see the revised rules as a path toward more advanced crypto investment options. The updated framework may help Japan launch products such as cryptocurrency exchange-traded funds. It could also pave the way for banks and other financial institutions to enter the market more confidently. Many analysts view this move as one of Japan’s most impactful crypto reforms and a development that may influence global regulatory discussions.
