The Japanese government is reportedly supporting significant changes to the country’s taxation on cryptocurrency profits, proposing a flat rate of 20%. This move aims to replace the current tiered system which can soar to 55%.

Japan’s Financial Services Agency (FSA) initially proposed these tax changes, indicating a bill introduction planned for early 2026. As reported by Nikkei Asia, the new regulations intend to standardize crypto taxes similarly to other financial products, including stocks and investment funds.

Under the existing framework, crypto trading taxation falls under individual and business income taxes—classified as “miscellaneous income.” Current rates vary between 5% and 45%, with an additional 10% inhabitant tax for higher-income earners.

Conversely, stocks and investment trusts are taxed distinctly, utilizing a 20% flat rate irrespective of earnings.

Lowering the tax could invigorate Japan’s cryptocurrency market, which may have been restrained by the excessive taxation. According to the Nikkei report, these changes will accompany a proposed framework aimed at better investor protection within the FSA’s formal legislative amends in 2026, which also pursues stricter trading regulations and conduct.

Japan Crypto Tax Reform after Extended Deliberation

The Japan Blockchain Association (JBA), a key lobbying entity for crypto, has pressed for tax reductions for nearly three years. Earlier in July 2023, the JBA communicated with the government outlining essential reforms, advocating for a tax alignment with conventional investments.

Translation: This letter requests a review of tax on crypto assets, which is the biggest hurdle for companies operating Web3 businesses in Japan and a disincentive for the public to actively own and use crypto assets.

There is no clarity on whether the JBA directly influenced the FSA’s considerations, although the financial watchdog had begun to favor the idea and was pushing for reform by September 2024.