Japanese Lawmaker Proposes Relaxation of Crypto Tax Laws

By Landon Manning

A member of the House of Councillors, the upper house of Japan’s legislature, has made a public proposal to loosen tax regulations on crypto assets to promote growth in the space.

Takeshi Fujimaki is a career banker who has worked both for Japanese and American banks and over the past several years has pivoted into being an elected official at the highest levels of Japan’s government. Earlier this December, he made a public statement calling for Japan to ease the burden of taxes on cryptocurrency.

“We will change the virtual currency taxation system to a certain form to promote the wider penetration of cryptocurrency into society and to encourage the development of blockchain technology,” said Fujimaki, proclaiming that “the tax system should not crush the future of cryptocurrency or blockchain.”

To that end, he proposed a four-step program to make tax laws friendlier to blockchain development.

The general theme of this four-part plan is to grant crypto asset trading certain leeway to reflect the riskiness of the investments. For one, Fujimaki proposed lowering the tax rate on cryptocurrency gains to 20 percent, from the 55 percent rate that applies to most capital gains. Fujimaki’s proposal outlined his support of the regular tax rate while describing this special circumstance, saying that “if a stable income, like a salary income, is expected, overall taxation application is also rational. But the transaction gains in cryptocurrency are not ... Revenues are unstable and there may be years to lose.”

Similarly, Fujimaki called for “loss carryforward deduction,” meaning that people could continue to write major losses off of their taxes, even if they made a profit in the subsequent year.

Finally, Fujimaki proposed a twin set of tax exemptions: one for trades between cryptocurrencies and one for small payments in cryptocurrencies. He claimed that “the small amount of cryptocurrency settlement should be tax exempt,” as this would result in the expansion of “cryptocurrency settlements in the real world.” In other words, facilitating everyday payments like those under $30 would give incentives to use cryptocurrency on a regular basis.

Japan, like many countries, has had a tumultuous relationship with crypto assets over the past several years. Although there are a great number of blockchain companies based in Japan, financial regulators in the country have recently toughened restrictions on cryptocurrency exchanges, as well as warning others to remain perfectly compliant with all regulations. For exchanges with the most egregious violations, Japanese prosecutors seem perfectly willing to pursue the most extreme punishments.

Nevertheless, there has been an active ecosystem for blockchain and cryptocurrency development within the parameters that the Japanese government has allowed. With federal lawmakers such as Councillor Fujimaki championing the status of cryptocurrencies, this particularly tough regulatory environment could open up in a significant way. Potential investors should look carefully at the development of legal initiatives like this, as they may be the boost that an already-robust industry needs to become a major world player in crypto.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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