Crypto News: Japan Backs Flat 20% Crypto Tax on Profits

Japan backs a flat 20% crypto tax to boost trading, improve competitiveness, and align digital assets with traditional financial product rules.

Japan is moving toward a major shift in its crypto taxation rules. The government and ruling coalition now support a plan to apply a flat 20% tax on crypto profits. This is a major change from the current system, which can charge a maximum of 55% on individual traders.

Government Supports Major Crypto Tax Overhaul

Japan’s Financial Services Agency first floated the reform in mid-November. The agency hopes to have a bill introduced in early 2026. According to Nikkei Asia, government leaders now support the proposal. This backing means that the plan has a lot of wind as lawmakers prepare a 2026 tax reform package. The idea is to bring crypto taxation in line with regulations for equities and investment funds.

The current tax structure has penalized domestic trading. Under the current rules, there is a progressive income tax on crypto gains for retail traders. This burden has sent some investors overseas. However, the proposed flat rate aims to support the market growth and encourage broad participation. The structure also splits the 20% take between the national and regional authorities at 15% and 5%.

Related Reading: Crypto News: Japan FSA Plans Mandatory Reserve Funds for Crypto Exchanges | Live Bitcoin News

Furthermore, under the reform, crypto profits fall under Japan’s separate taxation framework. This system includes certain sources of income in a separate category from salaries or business income. Supporters say that this results in more predictable obligations for investors. They also believe that it lowers barriers for new participants to have exposure to digital assets.

Under the plan, digital assets would be reclassified as financial products. This change gives them the status of being covered by the Financial Instruments and Exchange Act. As a result, crypto will experience the same standards as traditional securities. Authorities expect that this would better protect investors and reduce insider trading as a result of consistent oversight.

Reform Hopes to Increase Competitiveness in Asian Markets

The policy is aimed at attracting retail and institutional investors. By bringing the rules closer to stock markets, Japan aims to provide a more attractive environment for trading in digital assets. This approach is similar to what is already being done by other Asian financial centers. Those markets had the benefit of clearer rules and tax loads. Japan can look forward to similar results if the reform passes parliament.

Moreover, analysts say the plan may boost domestic liquidity. Lower tax rates tend to promote more frequent trading. They also minimize the chances of investors moving assets abroad. In addition, having a predictable fixed rate simplifies planning of firms offering crypto services. This can be used to support custody providers, exchanges, and fund managers.

Supporters also expect the reform to promote innovation. Developers may find the environment friendlier with a fairer tax structure. As trading increases, liquidity increases, and volatility decreases. These trends are able to support the broader ecosystem. They also minimize the risk of forced sales during market downturns, which can lead to sudden liquidation events.

As Japan prepares to revise the tax package for the last time, policymakers stress balance. They aim to support growth and yet have strong oversight. The combination of reduced taxation and increased clarity of regulations may push Japan closer to the center of the development of crypto in the region.