Japan’s lower house has approved a crypto tax cut bill that would reduce digital asset gains tax to a flat 20% rate, aligning it with stock taxation. The legislation proposes classifying crypto as financial instruments, paving the way for crypto ETFs and introducing stricter penalties for insider trading and unregistered sales.
Japan’s lower house of parliament has approved a bill to significantly reduce cryptocurrency gains taxes and establish a new regulatory framework. The proposed legislation would create a flat 20% tax rate on digital asset profits, down from the current maximum of 55%, aligning it with the taxation of stocks and bonds.
The bill would classify crypto assets as financial instruments under Japan’s Financial Instruments and Exchange Act. This classification is expected to take effect next year if it is approved by the upper house, creating a path for cryptocurrency-linked exchange-traded funds to reach Japanese investors.
The reform also introduces tougher penalties for market misconduct. The bill sets the same penalties for crypto insider trading as for stocks and increases prison sentences for trading unregistered crypto assets to 10 years, up from three years.
Masato Yoshizawa, an official from Japan’s Financial Services Agency policy and markets bureau, discussed the regulator’s aims. He noted that the regulator seeks to facilitate innovation by creating a sound trading environment. He also highlighted that the agency aims to promote healthy market development rather than directly promote crypto assets.
The legislation follows earlier amendments to the Financial Instruments and Exchange Act made in April, which formally classified crypto as financial instruments and banned insider trading. The proposed tax cut, anticipated by 2028, is expected to apply primarily to assets like Bitcoin and Ether, while stablecoins remain under a separate payments law.
Koichi Kano, Japan head for crypto market maker QCP Group, stated the law provides needed clarity for market participants. The move follows tests conducted by major Japanese banks, including MUFG Bank, Sumitomo Mitsui Banking Corporation, and Mizuho Bank, on digital asset settlements planned for fiscal 2026.
