The most powerful crypto lobbying groups in Japan argue that the existing tax rates impede sector growth and demand that taxes be lowered in order to stop the loss of talented workers.
It was recently reported that two of the most influential lobbying groups in Japan, the Japan Virtual and Crypto assets Exchange Association (JVCEA) and the Japan Cryptoasset Business Association (JCBA), are currently working on a proposal to present to Japan’s Financial Services Agency (FSA) this week.
Concerns similar to these have also been voiced by politicians affiliated with a variety of parties. Masaaki Taira, who is a part of the Liberal Democratic Party, which is the party now in power, is one of the politicians who has spoken out the most against this issue. He has been urging his colleagues to relax the laws in order to “halt the loss of digital talent,” and he has also been pursuing this goal.
Alterations to the tax rates
The idea will give re-adjustments to the current tax policy in order to make owning and issuing cryptocurrency cheaper.
At the moment, Japan levies a tax on any profit made from crypto investments,
whether or not the profit has been realized, at a rate of thirty percent for corporations and up to fifty-five percent for individual investors.
These percentages are going to be reduced as part of the proposal. It will propose that any profits on cryptocurrency earnings be exempt from taxation, provided that the earnings were not realized via short-term positions taken by corporations. On the other hand, it will recommend a set rate of twenty percent for people who invest on their own behalf.
A recent report stated that the Financial Stability Authority (FSA) has reportedly been debating the necessity to cut crypto taxes in light of the fact that certain lawmakers have highlighted the same issues. The watchdog hasn’t decided whether or not to include this update in its annual revision despite the fact that there have been discussions about lowering tax rates. August is the month in which the annual revision is due to be filed to the relevant tax authorities. It is anticipated that the JVCEA and JCBA will have delivered the proposal by that time.
Japan’s crypto regulatory framework
Japan was the first country in the world to suggest the implementation of a legal framework to govern cryptocurrency.
As early as April 2017, Japan officially acknowledged certain cryptocurrencies as a form of legal money.
In 2019, Japan’s financial regulator, the FSA, tightened the regulations for cryptocurrency exchanges in response to the Coincheck hack that occurred in 2018. The breach was one of the largest at the time, and the perpetrators made off with nearly half a billion dollars’ worth of cryptocurrency.
Since that time, all cryptocurrency exchange businesses have been required to adhere to the anti-money laundering (AML) and combating financial terrorism (CFT) regulations of the country.
After the 2019 update, Japan continues to indicate that additional restrictions and regulations will be imposed on the cryptocurrency market. In the year 2021, the county government launched an endeavor to restrict the activities of the DeFi. After the failure of the LUNA stablecoin, Japan implemented a law that restricted the issuing of stablecoins to licensed financial institutions exclusively.
Some cryptocurrency companies have already left Japan due to the country’s high taxes and stringent regulations.
The majority settled in Singapore, which was both the nearest and most welcoming nation to them.
Sota Watanabe, CEO of Stake Technologies, who also relocated his company to Singapore, in a recent interview said,
“Running a successful business in Japan is next to impossible.
Even if the worldwide struggle for Web 3.0 hegemony has already begun, Japan isn’t even at the start line of the competition.
In spite of the stringent regulations, the FSA believes that the crypto realm in Japan is capable of self-regulating. In 2018, the country came up with the idea to self-regulate the cryptocurrency business by establishing the JVCEA. However, the FSA has recently voiced its dissatisfaction with the self-regulation system by saying:
“When Japan opted to experiment with self-regulation of the cryptocurrency business, many individuals around the world claimed it would not work, and Japan was met with widespread criticism as a result. Regrettably, based on what we can tell for now, it appears as though they may be correct.
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