Leading crypto advocacy organizations in Japan want to present a proposal to the country’s financial regulatory body to address its high crypto taxes, which, according to experts, reduce Japan’s competitiveness as a center for the cryptocurrency industry.
According to Danny Talwar of the crypto tax platform Koinly, the legislative framework in Japan makes it challenging for companies and private investors to keep digital assets there.
The request will be presented to Japan’s Financial Services Agency (FSA) this week, according to an internal letter seen by Bloomberg, urging them to stop taxing unrealized gains on cryptocurrency holdings “if the business owns them for purposes other than short-term transactions.”
The plan also requests that the financial regulator reduce income tax rates on cryptocurrency returns for individual investors from the existing rates, which may reach as high as 55 percent, to 20 percent.
In contrast to more crypto-friendly countries, the regulatory environment in Japan currently makes it challenging for businesses and individual investors to hold digital assets, according to Danny Talwar, Head of Tax (APAC region), of the crypto tax platform Koinly:
“The high crypto tax rates make Japan less competitive on the international front compared to countries like Singapore and Dubai, which are increasingly becoming digital asset hubs for business.”
According to Talwar, situations in which taxes paid are not proportionate to the asset value upon realization are particularly frequent for volatile asset classes and may result from the taxation of unrealized capital gains.
Although the specifics of the proposal are still unknown, Talwar added that the FSA’s approval of it would be a “step forward for crypto-friendly regulation” in Japan.
Regulations “should not hinder innovation in this fast-growing business,” Talwar said in regards to them. But before doing so, it’s critical that legislators comprehend how taxing digital assets fits into the existing tax and regulatory systems, he added.
“Japan is an impossible place to do business… the global battle for a Web 3.0 hegemony is under way, and yet, Japan isn’t even at the start line”.
Watanabe is one of many CEOs who moved their cryptocurrency businesses to Singapore, citing one of the reasons as being the country’s high taxes.
Masaaki Taira, a politician from Japan, asserted that politicians must loosen their stance on cryptocurrencies in order to “stop the exodus of digital talent.”
The Japan Cryptoasset Business Association (JCBA) and the Japan Virtual & Crypto Assets Exchange Association (JVCAEA), whose members include cryptocurrency companies like the Bitcoin Association and forex broker WikiFX, are said to be working on the idea.