- The Japan Blockchain Association (JBA), led by Yuzo Kano, CEO of bitFlyer, has submitted a proposal to the government for changes in the cryptocurrency tax system.
- The proposal includes three main points: abolishing the end-of-term unrealized profit tax on tokens issued by third parties, changing the taxation method for individual cryptocurrency transactions to a separate declaration tax and setting the rate at a flat 20%, and abolishing income tax on profits each time cryptocurrencies are exchanged.
- The JBA believes that these changes will contribute significantly to the growth of the Japanese economy, which is undergoing transformation, and increase tax revenue due to increased use of cryptocurrencies, increased investment in cryptocurrencies, increased profit realization, and increased proper declarations.
The Japan Blockchain Association (JBA), headed by bitFlyer CEO Yuzo Kano, has put forth a proposal to the Japanese government for a revision of the existing cryptocurrency tax laws. The proposed changes aim to foster a conducive environment for citizens to hold and use cryptocurrencies, thereby promoting the growth of Web3 (decentralized web) businesses in Japan.
Key Aspects of the Proposed Tax Reforms
The JBA’s proposal for tax reform revolves around three main points. Firstly, it calls for the abolition of the end-of-term unrealized profit tax on tokens issued by third parties. The National Tax Agency of Japan had revised some corporate tax rules in June 2023, allowing companies to exempt the fair value evaluation of cryptocurrencies they issued themselves. However, the end-of-term unrealized profit tax on tokens issued by third parties remains a hurdle for domestic companies venturing into new Web3 businesses.
Secondly, the JBA proposes a change in the taxation method for individual cryptocurrency transactions to a separate declaration tax, with a flat rate of 20%. According to the latest statistics from the Japan Virtual Currency Exchange Association (JVCEA), the number of cryptocurrency trading accounts opened in Japan continues to increase. As of April 2023, about 6.8 million accounts have been opened, significantly exceeding the number of accounts (about 3.61 million) at the time when the tax system for foreign exchange margin trading (FX) was changed from comprehensive taxation to separate declaration taxation in June 2011.
The third point in the proposal is the abolition of income tax on profits each time cryptocurrencies are exchanged. This is expected to facilitate operations suitable for Web3 use cases such as DeFi and NFT markets, leading to an improvement in the convenience of cryptocurrencies.
The Impact of the Proposed Tax Reforms
The JBA believes that the realization of these tax reform requests will help Japan to be recognized as a leading Web3 country both domestically and internationally. It is expected that the economic sphere of Web3, a new industry, will expand, contributing significantly to the future growth of the Japanese economy, which is facing transformation. Additionally, it is expected that the increase in the number of cryptocurrency users, the increase in the amount of investment in cryptocurrencies, the increase in profit realization, and the increase in proper declarations will contribute to tax revenue, limiting the impact on tax revenue reduction and potentially leading to an increase in tax revenue.
About the Japan Blockchain Association (JBA)
The JBA is an organization that works to contribute to the development of the Japanese economy by making blockchain technology a more secure and reliable mechanism to support the future development of the Japanese economy. The JBA, together with the Japan Cryptocurrency Business Association (JCBA), submitted a request in 2022 to resolve the tax issues related to cryptocurrencies in Japan and is advancing discussions with the Financial Services Agency.
Conclusion
The proposed changes to the cryptocurrency tax system by the JBA could potentially revolutionize the way cryptocurrencies are perceived and used in Japan. By fostering a more conducive environment for the use and trading of cryptocurrencies, the JBA hopes to stimulate the growth of Web3 businesses and contribute to the overall growth of the Japanese economy. However, the success of these proposed changes will depend on the government’s response and the subsequent impact on the cryptocurrency market.
