Cryptocurrency tax reform proposal from JBA to government

The Japan Blockchain Association (JBA), led by Yuzo Kano, CEO of bitcoin exchange bitFlyer, has submitted a proposal to the Japanese government for a review of current cryptocurrency tax laws. The proposed changes aim to support the growth of Web3 (decentralized web) businesses in Japan by encouraging citizens to hold and use cryptocurrencies in Japan.

JBA’s tax reform proposal revolves around three main points. First, it requests the abolition of the period-end unrealized profit tax on tokens issued by third parties. Japan’s National Tax Administration revised some corporate tax rules in June 2023, giving companies exemptions from fair value assessment of their own issued cryptocurrencies. However, the end-of-period unrealized profit tax on tokens issued by third parties remains a barrier for domestic companies entering new Web3 businesses.

Second, the JBA proposes that the taxation method for individual cryptocurrency transactions be changed to a separate declaration tax and the rate set to a fixed 20%. According to the latest statistics from the Japan Virtual Currency Exchange Association (JVCEA), the number of cryptocurrency trading accounts opened in Japan is still increasing. Approximately 6.8 million accounts were opened as of April 2023, significantly exceeding the number of accounts (approximately 3.61 million) in June 2011 when the tax system for foreign exchange margin trading (FX) was changed from comprehensive taxation to separate taxation.

The third point of the proposal is the removal of income tax from profits made every time cryptocurrencies are exchanged. This is expected to facilitate transactions suitable for Web3 use cases such as DeFi and NFT markets. JBA believes that the realization of these tax reform demands will help Japan to be recognized as a leading Web3 country both domestically and internationally.