Japan’s New Crypto Tax Could Wake ‘sleeping Giant’ Of Retail Investors

The crypto industry in Japan is poised for a surge in growth among retail investors, observers say, as the government plans to introduce a moderate 20% tax.

A new, more moderate tax on digital assets in Japan is projected to make crypto more appealing to retail investors.

Lawmakers in the National Diet, Japan’s legislature, reportedly support a proposal from the country’s financial watchdog, the Financial Services Agency (FSA), that would lower taxes on crypto. The rate would decrease from a maximum of 55% to 20%, aligning the taxation regime more closely with traditional assets and securities.

Relaxing the tax code reflects a growing trend of the government moderating its stance toward crypto in Japan. From a relative gray zone to strict regulations, to becoming part of a national growth plan, the government has gradually recognized crypto as part of the financial industry.

This growing recognition, soon to take the form of lower taxes for crypto traders, will onboard new retail users, industry observers state.

For years, cryptocurrencies operated in a somewhat gray space in Japan. After the collapse of the Mt. Gox cryptocurrency exchange in 2014, the Diet decided that digital assets like Bitcoin (BTC) were not to be considered currency or bonds. Therefore, they could not be regulated under the Banking Act and Financial Instruments and Exchange Law.

This effectively prohibited banks and companies dealing in securities from offering cryptocurrency-related services.

In May 2016, the FSA established a regulatory regime for crypto-asset service providers under the Payment Services Act (PSA). Subsequent amendments to the PSA in 2017 legalized crypto and created standards for exchanges. These included Anti-Money Laundering, Know Your Customer and registration requirements.

The amendments also labelled crypto as “miscellaneous income.” The progressive income tax rates in Japan range from 5% to 45%. Combined with a flat 10% inhabitant tax, the maximum tax penalty for crypto adds up to 55%.

Related: An overview of cryptocurrency regulations in Japan

Source: CoinTelegraph