Japan Proposes 20% Flat Tax on Cryptocurrency Gains

TLDR

• Japan's new tax rate will be a flat 20% on gains.
• This reform affects over 105 approved cryptocurrencies.
• Tax changes aim to boost trading activity and market clarity.

Japan has introduced a significant proposal regarding cryptocurrency taxation, aiming to set a flat 20% tax on crypto gains. This comes as a considerable shift from the existing progressive tax system, which currently peaks at 55%. This tax reform, supported by the ruling coalition, is expected to be implemented by 2026.

The Japanese government, along with the Financial Services Agency (FSA), is spearheading this change. This proposed overhaul aligns with Japan's previous efforts to regulate cryptocurrency markets by classifying crypto assets as financial products under the Financial Instruments and Exchange Act (FIEA). According to multiple credible sources, this move is set to enhance market clarity and foster growth.

Key Features of the Proposed Tax System

The reformed tax system would move crypto gains into a separate-taxation framework. This comprises a 20% rate divided between national and regional governments, at 15% and 5% respectively. This helps to align crypto asset taxation with equities and investment trusts, improving integration with traditional financial markets. Additionally, mandatory disclosure obligations and insider-trading prohibitions will be imposed, aligning crypto regulations with conventional securities rules.

This regulatory change will impact over 105 approved cryptocurrencies, including widely traded tokens like Bitcoin (BTC) and Ethereum (ETH). Such reforms are anticipated to stimulate domestic trading activity. Japanese domestic exchanges have already reported spot trading volumes exceeding $9.6 billion in September 2025.

Potential Shifts in the Crypto Market Landscape

This tax initiative could influence regional hubs like Singapore and Hong Kong to reconsider their tax and regulatory strategies for cryptocurrencies. Japanese regulators hope this reform will encourage more institutional entry into Japanese markets by securing the status of crypto assets as financial products. This would enable banks, insurers, and public companies to more easily provide crypto-related services.

This move mirrors earlier regulatory steps taken by Japan between 2017 to 2019. Back then, Japan introduced a licensing regime and investor protections, which contributed to a more stable crypto trading environment. Despite these protections, high tax complexities remained an issue, which this current reform aims to address.

Impacts on Domestic and Institutional Markets

The introduction of this flat tax rate is expected to boost both retail and institutional trading within Japan. By reducing current tax disincentives, Japan aims to create a more transparent and regulated market atmosphere. This change will apply to major token trades on licensed Japanese exchanges, further enhancing market liquidity and trading volumes. However, official on-chain data such as Total Value Locked (TVL) and liquidity shifts has yet to be revealed.

Japanese officials have pointed to this reform as a balanced approach to stimulate growth while incorporating traditional securities market controls. These reforms may pave the way for Japan to become a more attractive destination for cryptocurrency trading, both for individual investors and institutions.

By making these changes, Japan takes significant steps forward in reducing tax disincentives and nudging towards more inclusive participation in its crypto market. For further reading on latest updates and news on cryptocurrency trends, one can explore additional reputable sources.

As Japan looks to reshape its cryptocurrency landscape, various stakeholders closely watch these developments. However, at present, leading figures within the crypto community, including high-profile names such as CZ and Vitalik Buterin, have yet to publicly comment on the updates through official channels.