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After years of steep tax rates, the Japan government is now proposing a flat 20% crypto tax on profits starting in 2026.
Author: Sahil Thakur
Published On: Tue, 02 Dec 2025 06:32:47 GMT
2nd December 2025 – After years of steep tax rates, the Japan government is now proposing a flat 20% tax on cryptoc profits starting in 2026. This reform marks a bold shift in Japan’s approach to digital assets, aiming to attract investors, encourage innovation, and bring crypto into the financial mainstream.
Currently, crypto gains in Japan are taxed progressively, with rates climbing up to 55%. This system lumps crypto profits in with other personal income like salaries, which has discouraged many retail and institutional traders.
Under the new proposal, however, crypto earnings would be taxed at a flat rate of 20%. This mirrors how capital gains from stocks and investment trusts are treated. The breakdown includes 15% national income tax and 5% local resident tax. This change separates crypto from traditional income and places it under a special category.
According to NHK, the proposal will be officially included in the 2026 tax reform package, expected by December.
This tax shift follows a wider regulatory strategy led by Japan’s Financial Services Agency (FSA). Earlier in 2025, the FSA reclassified crypto as a financial product, grouping it alongside stocks and funds under the Financial Instruments and Exchange Act.
This was a major trigger. By recognizing 105 cryptocurrencies, including Bitcoin and Ethereum – the FSA opened the door for updated tax rules and institutional access. The Japanese government now wants to:
The timing also aligns with efforts to expand equity markets and even allow minors to make tax-free investments.
For retail traders, this reform could be a game-changer. Instead of losing up to 55% of their profits, investors would now pay a predictable 20%. This could boost trading volumes and restore confidence.
The simplified system also improves planning and transparency. Investors can now calculate expected taxes before selling, just as they would with equities. This treats crypto more like a legitimate asset class and not as speculative income.
The FSA is preparing to allow insurance companies and banks to offer crypto investment products. These services would be tied to approved tokens held in custody, likely using regulated brokers or partners.
A whitelist of around 150 approved tokens is in the works. Inclusion in this list will be necessary for market access, including trading and custody. Assets not on the list will face restrictions.
This dual classification system (approved vs. non-approved) adds clarity for institutions and sets the stage for deeper integration of crypto into Japan’s financial system.
Notably, the FSA will also launch a public consultation period before finalizing these laws.
Japan’s 20% flat tax would match the UK’s capital gains tax and beat France’s 30% rate. The US taxes crypto profits as property, with rates from 0% to 37% based on holding duration. Germany exempts long-term holdings, but taxes short-term gains like income.
With this reform, Japan leapfrogs into the ranks of the most crypto-friendly G7 nations.
The legislation is expected in late December, with full implementation in 2026. Until then, current tax rules still apply.
However, the message is clear: Japan wants to lead on digital asset regulation. By combining fairer tax treatment with a modern legal framework, it hopes to pull ahead as a crypto innovation hub in Asia and beyond.
If successful, the reform could push other countries to reconsider their tax approaches, especially if Japan sees a spike in institutional allocation and trading volume.
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