While the developing world grapples with how to treat cryptocurrencies and their businesses, Japan is eager to adopt them into mainstream economy and make things easier. The country is looking into reducing the tax burden on crypto ventures that list new coins, as well as crypto investors who currently pay a high capital gains tax.
What is the current crypto tax rate in Japan?
Reports as well as a tweet by a Japanese official reveal that post a review of current corporate tax rates, start-ups in the crypto field will pay less taxes. The Japanese regulator is mulling over exempting gains made in crypto token issues that are taxed even if they are held by the issuer and not sold. The highest tax rate on capital gains also goes up to 55%. Some reports cite a rate of 30% for crypto profits, and that also includes unrealized profits.
Currently, if a crypto project issues tokens and lists them up on an “active market”, they get to pay tax at the end of the tax period on all the tokens held by the venture when the market price increases. Airdrops are also taxed on both sides. The tax reform will exempt unrealized gains from taxes.
Why is Japan bringing in tax breaks for crypto?
The proposed tax breaks that may be realized in 2023 form part of the prime minister Kishida’s “New Capitalism” agenda. Japan is one of the few countries that have legalized cryptocurrencies, and this year in June declared stable coins as digital money.
The proposal to give tax relief comes in the wake of reports that crypto startups are moving out of Japan to Singapore. There are also two lobby groups in Japan that have urged for similar revisions – the Japan Crypto-Asset Business Association, and the Japan Crypto-Asset Exchange Association.
Stable coins recognized as “digital money”
In June, Japan again took a pioneering step and legalized stable coins as digital money. This move came after the collapse of the Terra UST. The stable coins however will need to be backed by Yen or some legal tender. The stable coins should also offer the right to owners to be sold at face value for fiat. In addition, only authorized or licensed entities will be allowed to issue stable coins, such as money transfer agents, banks or trusts.
What’s popular in Japan?
With the continuation of the crypto winter, which cryptocurrencies have been on top of the list for Japanese crypto traders. Statista reveals that Ripple (XRP) was the top choice in February this year in terms of trading volumes, followed by Symbol and Stellar.
Sources:
https://www.statista.com/statistics/1304070/japan-major-cryptocurrencies-by-spot-trading-volume/
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