Japan's cryptocurrency tax rate is expected to be reduced to 20%! The House of Representatives passes the bill, proposing cryptocurrencies be classified as financial products

The Japanese House of Representatives has passed a new bill proposing to reclassify cryptocurrencies as "financial instruments." This move is expected to significantly reduce the past high miscellaneous income tax rate of up to 55% to a flat rate of 20%, with the new regulation potentially coming into effect as early as next year.

Recently, Japan's House of Representatives successfully approved a landmark bill aimed at reclassifying cryptocurrencies as "financial instruments." This not only signifies that Japan's regulation of virtual assets will align more closely with traditional financial markets but also suggests that the previously burdensome high tax rates for investors may see substantial reductions.

According to Japanese parliamentary records, this bill, proposed by the Cabinet in April of this year, was approved by the House Financial Affairs Committee on June 10. Next, if it passes the Senate vote smoothly, this new regulation, which is crucial for Japan's crypto ecosystem, could be officially implemented as early as next year, further tightening and refining the regulatory framework for the cryptocurrency market.

According to the bill, cryptocurrencies will be included within the scope of "financial instruments," meaning virtual assets will face regulations similar to those for traditional stocks. While this indicates that the cryptocurrency industry will need to comply with stricter standards in the future, it also opens the door for a "friendly tax system" for investors.

Currently, Japanese tax authorities regard gains from cryptocurrency investments as "miscellaneous income," with investors facing a progressive tax rate of up to 55%. Once officially reclassified, the capital gains tax rate on cryptocurrencies is expected to be significantly lowered to a flat 20% "single rate (separate taxation)," similar to stocks, which will help reduce transaction costs and attract capital back into the Japanese market.

In the past, Japan's Financial Services Agency (FSA) mainly regulated cryptocurrencies based on the "Fund Settlement Act," viewing them solely as "payment tools." However, as the scale of the cryptocurrency market continues to expand and institutional investors participate more actively, Japanese regulators' stance on digital assets has gradually evolved.

At the time of legislative push, Japan's crypto industry was experiencing explosive growth, with the most notable performance in the "stablecoin" sector.

In fact, Japan had already paved the way for stablecoin development as early as 2023. By amending the "Fund Settlement Act," the country officially introduced the concept of "electronic payment tools," allowing registered service providers and banks to issue and manage stablecoins.

Following the clear regulations, several Japanese companies quickly moved into action: in October last year, fintech firm JPYC Inc. announced the launch of Japan's first legally recognized yen stablecoin, JPYC; in February this year, SBI Holdings and Startale Group launched JPYSC, a yen stablecoin backed by a trust bank, designed specifically for institutional and cross-border payment scenarios; last month, the Japan Blockchain Association announced plans to issue the yen stablecoin EJPY on Japan Open Chain and Ethereum.

Japan's traditional banking giants—the "Big Three" of Mitsubishi UFJ (MUFG), Mizuho, and Sumitomo Mitsui (SMBC)—have also signaled their collective move, with plans to officially launch a jointly issued stablecoin for commercial payments by the end of March 2027.

• This article is reprinted with permission from: "BlockCast"
• Original title: "Japan House of Representatives Passes Bill! Cryptocurrency to be Classified as 'Financial Instruments,' Tax Rate Drops from 55% to 20%"
• Original author: Block Sister Mel