Time to ‘Redefine’ Crypto, Say Key Japan Lawmakers

Top Japanese lawmakers are advocating for a redefinition of crypto and a fresh approach to regulation. Their statements suggest that Tokyo may be on the verge of implementing further crypto reforms. The call for change comes from two members of the ruling Liberal Democratic Party (LDP): Seiji Kihara, who leads the party’s “blockchain promotion” group, and Masaaki Taira, chair of the party’s web3 adoption unit.

In their joint stance, Kihara and Taira emphasize the need to redefine legal terms related to cryptoassets, including Bitcoin (BTC). Currently, tokens are legally defined in Japan as a “substitute for” concepts like “currency” or “money.” However, these same tokens are also considered “assets” within investment products. This discrepancy prompts the lawmakers to call for a revision: “The [crypto] market has grown, and people are now investing in [crypto-related] financial products. Despite this, the contradictions that arose from its legal beginnings as a money substitute remain. That means we need to redefine [crypto-related legal terms],” explains Kihara.

Rethinking Terminology

Taira concurs, highlighting that crypto plays a role similar to that of gold. To facilitate more normal handling by financial institutions such as banks and securities companies, the related terminology must be redefined. Currently, Japanese crypto exchanges and securities firms operate under separate laws, and the tax system follows suit. However, critics argue that Japan’s crypto tax system is overly restrictive, leading many blockchain startups to leave the country. While the government has agreed to reform tax rules for corporations, campaigners continue to push for individual tax rule changes. Presently, crypto traders can face tax bills of up to 55% of their profits.

The Liberal Democratic Party (LDP), which has governed Japan since 1965, has indicated its commitment to reforming individual crypto tax rules. An LDP white paper issued in April emphasized the urgency of addressing crypto tax reform issues.