Japan is proposing a 20% tax on investment profits from Crypto

From 55% to 20% growth limit

Japan is preparing one of the most significant regulatory changes ever to hit the digital asset sector — a proposed 20% profit cap on cryptocurrency profits — a reform designed to simplify taxation, reduce excessive speculation and boost revenue from one of Asia’s most vibrant retail trading markets.

The plan, currently under review by Japan’s Financial Services Agency (FSA) and Ministry of Finance (MoF), could reshape how individuals and businesses report crypto income, aligning Japan’s framework closer to that of Singapore, Hong Kong, and the United States, where crypto taxes have evolved to support widespread adoption.

If enacted, this would mark a decisive move to stabilize Japan’s rapidly growing cryptocurrency economy, which has seen a sharp increase in retail participation and interest in digital assets amid a strengthening yen and the growth of domestic exchanges such as bitFlyer, Coincheck, and Binance Japan.

Complex legal framework

Under Japan's current tax regime, profits from cryptocurrencies are considered "mixed income," subject to progressive tax rates of up to 55% depending on total annual income.

This legal framework has long been criticized by investors and policymakers for being too restrictive and administratively burdensome, forcing many high-volume traders to move abroad or engage in non-compliant activities.

By imposing a fixed 20% cap on cryptocurrency profits, similar to the tax model for stock investments, Japan aims to:

• Simplify reporting requirements,

• Encourage domestic trading and depository,

• Enhance tax compliance in general and

• Reduce speculative bubbles caused by short-term trading.

The lack of clarity around loss carryover, staking rewards, and profits related to NFTs has also created a compliance nightmare — especially as trading volumes on Japanese exchanges hit record highs in 2025.

Balancing Growth and Control

The proposed 20% tax cap would apply to individuals, businesses and investment entities, including profits from:

• Spot and derivatives trading,

• Income from betting and profit farming,

• Sales of NFTs and digital collectibles, and

• Token allocation and airdrop.

At the same time, the proposal includes a three-year carryforward loss deduction, allowing investors to offset future profits — a mechanism seen as essential to legitimizing cryptocurrencies as an asset class rather than just speculation.

For policymakers, the new framework offers dual benefits:

• Encourage domestic capital participation by removing fears of excessive taxation, and

• Untapped tax revenue from previously underreported profits.

According to internal estimates by the FSA, Japan could gain 400–600 billion yen (about $2.6–4 billion) in new revenue annually after the reform takes effect.

Evaluation and Conclusion

Japan’s proposed 20% crypto profits cap is more than just a tax adjustment — it’s a strategic rethink of how the country integrates digital assets into its financial and economic systems.

By simplifying taxation, curbing excessive speculation and encouraging compliance, Japan is positioning itself to capture both innovation and revenue as the global cryptocurrency landscape matures.

If approved, this reform would mark the beginning of a new phase of regulatory sophistication in Asia — where cryptocurrencies are no longer an external element of the financial system, but a disciplined component of it.

Disclaimer: The information presented in this article is the author's personal opinion in the cryptocurrency field. It is not intended to be financial or investment advice. Any investment decision should be based on careful consideration of your personal portfolio and risk tolerance. The views expressed in this article do not represent the official position of the platform. We recommend that readers conduct their own research and consult with a professional before making any investment decisions.