Japan’s ruling party proposes capping crypto tax rate at 20%, matching stocks

Japan's ruling party has drafted a proposal to reduce the crypto tax rate from the current maximum of 55% to 20% and is currently soliciting feedback.

The Liberal Democratic Party (LDP) published on Thursday the draft of a regulatory reform proposal seeking to position cryptocurrency as a new asset class under the Financial Instruments and Exchange Act, according to a translated post on X from Akihisa Shiozaki, a member of Japan's House of Representatives.

The proposed regulatory shift seeks to move cryptocurrency classification from the Payment Services Act to the Financial Instruments and Exchange Act. Such a change would categorize cryptocurrencies as "financial products" and introduce a separate 20% taxation rate, similar to that of securities investments.

Shiozaki, who leads a Web3 working group in LDP, said the proposal aims to develop the market, protect investors and implement separate taxation for crypto gains. The proposal noted that such separate crypto classification could pave the way for a potential spot crypto exchange-traded fund in Japan.

Japan currently imposes up to 55% taxes on crypto gains, as cryptocurrency is classified as miscellaneous income. In December, the government approved a tax regime revision that seeks to exclude corporations from paying tax on unrealized crypto gains if they hold the assets longer-term.

"If it is passed, it will be a win for the industry," Sota Watanabe, CEO of Startale which partnered with Sony to launch Soneium, wrote on X today. "The government has been speaking with industry leaders of Japan and this is a great outcome of collaborations."

The party is collecting public feedback on the proposal until March 31 before submitting it to the Financial Services Agency. Last month, the FSA announced plans to reveal further directions for crypto regulation by June, according to Nikkei.