Japan’s strongest crypto lobbying group says current tax rates are hindering the growth of the industry and is calling for lower taxes to prevent the outflow of talent.
Bloomberg News Two top lobby groups, the Japan Cryptocurrency Asset Business Association (JCBA) and the Japan Cryptocurrency Asset Exchange Association (JVCEA), reported that they are working on a proposal to be submitted to the Financial Services Agency (FSA) of Japan this week.
Politicians from various political parties have expressed the same concerns. Masaaki Taira, a member of the ruling Liberal Democratic Party, is one of the loudest politicians in this matter. He has announced and pursued his colleagues to relax regulations to “stop the outflow of digital talent.”
Change in tax rate
According to an internal note seen by Bloomberg, the proposal provides a readjustment to the current tax system to make crypto holding and issuance cheaper.
Japan currently taxes all profits from both realized and unrealized crypto investments at a tax rate of 30% for businesses and up to 55% for individual investors.
The proposal suggests lowering these percentages. We propose to exempt all profits of cryptocurrency income from tax unless it is obtained from a company’s short-term position. On the other hand, for private investors, a fixed interest rate of 20% is offered.
Since certain politicians raised the same issue, the FSA has also been discussing the need to lower cryptocurrencies. Bloomberg.. Despite discussions about tax cuts, Watchdog did not decide whether to include this update in its annual revision. Annual revisions are submitted to the tax authorities each August. JVCEA and JCBA plan to submit their proposals by then.
Japanese cryptographic regulations
Japan is the first country to imply a legal system. adjust Cryptocurrency. Japan recognized crypto assets as legal tender as early as April 2017.
Japan’s Watchdog FSA tightened its crypto exchange rules in 2019 after the country was hit by a Coincheck hack. The hack was one of the largest at the time, with hackers stealing over $ 500 million in crypto assets.
Since then, all cryptocurrency exchange companies must comply with the country’s Anti-Money Laundering (AML) and Fight against Financial Terrorism (CFT) rules.
After the 2019 update, Japan continues to imply more rules and regulations regarding crypto space. In 2021, the county established an initiative to regulate the operation of DeFi. After the LUNA Stablecoin crash, Japan passed a bill limiting the issuance of stablecoin to authorized banks only.
Due to high taxes and strict regulations, some cryptocurrency companies have already been expelled from Japan. Most have moved to Singapore, the closest and most friendly country.
Sota Watanabe of Stake Technologies Inc., who also moved the company to Singapore, said: Bloomberg:
“Japan is an impossible place to do business. The global battle for Web3.0 hegemony is underway, but Japan is still not at the starting line.”
Despite the strict rules, the FSA believes that Japan’s cryptographic sphere is self-regulating. The country established JVCEA in 2018 to self-regulate the crypto industry. However, the FSA most recently expressed dissatisfaction with the self-regulatory system, stating:
“When Japan decided to experiment with cryptocurrency self-regulation, many people around the world said it wouldn’t work. Unfortunately, it seems possible at this point.”
