Japanese Crypto Firms to Continue Pushing for Tax Reform

In a bid to reform Japan’s crypto tax laws, major Japanese crypto firms, including prominent exchanges, are intensifying their efforts. The Japan Blockchain Association (JBA), representing most of the nation’s significant crypto exchanges and blockchain-related companies, is taking the lead. Yuzo Kano, CEO of the long-standing market leader bitFlyer Holdings, announced that the JBA would focus on introducing new tax measures within the next 12 months.

The Taxation Challenge

Japan’s current tax laws pose challenges for individual crypto traders. Unlike many other countries that impose a flat-rate capital gains tax on annual earnings, Japanese law requires traders to categorize their coin-related profits as “other income” on tax declarations. Consequently, high-earning individuals may face up to a 55% tax rate on their crypto earnings, significantly higher than the global average of around 20%.

JBA’s Proposed Reforms

The JBA aims to address these issues by advocating for tax reforms that benefit individual traders. Here are the key proposals:

1. Separate Self-Reporting Taxation: The JBA will petition Tokyo to change the taxation method for individual cryptocurrency transactions, moving away from the current “other income” classification. Instead, they propose a flat 20% tax rate for crypto earnings.
2. Eliminating Income Tax on Crypto-to-Crypto Trades: In many countries, only crypto-to-fiat trades are taxable events. The JBA wants to eliminate income tax on profits made from crypto-to-crypto trades.
3. Carry-Forward Losses: The JBA seeks to allow individual crypto traders to carry forward their losses on tax declarations.
4. Reforming Leverage Ratios: Additionally, the JBA wants the government to revise its restrictive leverage ratios cap for crypto trading.

The JBA’s efforts have already led to positive changes in crypto tax rules for corporations. Last year, Tokyo agreed to scrap taxes on unrealized “paper” crypto gains for businesses holding tokens. As the JBA celebrates its 10th anniversary this year, it remains committed to fostering sustainable development in the industry through the adoption of web3 technologies.