Japan DPP Leader Proposes Crypto Tax Reform for Web3 Growth

Yuichiro Tamaki, head of Japan’s Democratic Party for the People (DPP), has put forward a proposal for crypto tax reform aimed at fostering the growth of a token economy, which includes Web3 and NFTs, should he secure victory in the elections.

His initiative seeks to reduce the tax on crypto earnings to a 20% separate declaration, rather than categorizing them as miscellaneous income.

Plan to Reduce Crypto Taxes

As outlined in the campaign document, Tamaki proposed allowing losses to be carried forward for three years and exempting taxes on the exchange of one crypto asset for another.

Additional proposals involve increasing leverage limits from 2x to 10x and introducing cryptocurrency exchange-traded funds (ETFs). The reform plan also aims to support monetary innovation at the local level, including the digitization of the yen and enabling local governments to issue their own digital currencies. The ultimate goal is to invigorate regional economies, potentially steering Japan towards a more contemporary financial ecosystem.

Currently, crypto investors face tax rates as high as 55% categorized as miscellaneous income. Thus, a 20% tax on crypto gains would align with the current rate for stock market earnings, effectively leveling the playing field between digital assets and traditional financial investments.

Tamaki also mentioned that the DPP might consider tax reductions on other financial gains in the future, but for the moment, their primary focus is on positioning Japan as a frontrunner in Web3. The DPP leader expressed in a translated X post read,

“For now, we aspire to make Japan a robust nation in the Web3 sector.”

Evaluating Crypto Regulations

CryptoPotato recently highlighted that Japan plans to review the effectiveness of its crypto asset regulations in the coming months, which may pave the way for crypto ETFs in the country.

The review will analyze the existing regulatory framework under the Payments Services Act (PSA), which classifies cryptocurrencies like Bitcoin as legal property and requires crypto exchanges to adhere to Anti-Money Laundering (AML) and Counter Financing of Terrorism (CFT) regulations. Simultaneously, the Financial Instruments and Exchange Act (FIEA) oversees crypto derivatives.

Japan’s Financial Services Agency (FSA) aims to assess whether these regulations have successfully safeguarded investors, since the majority of Japanese users regard crypto assets as investments rather than methods of payment.