Japan Proposes 20% Tax on Crypto Profits, Matching Stock Tax Rate

Japan is preparing for a major shift in how cryptocurrency gains are taxed. The government now supports a flat 20% tax on profits, a significant reduction from the current tiered system that can reach up to 55% for high earners. This approach shows increasing acceptance of digital assets as a mainstream investment. A clearer and lower rate could attract more involvement from both individual traders and companies.

How Japan Plans to Align Crypto and Stock Taxes?

Today, profits from cryptocurrency are classified as miscellaneous income. They are treated similarly to wages or business earnings, with rates that rise as total earnings grow. High earners may face up to 45% income tax, plus an additional 10% inhabitant tax at the municipal level, which can push some traders’ effective rate to more than double the proposed 20% applied to stocks and investment funds.

Huge. The Japanese government has officially begun the process of adjusting the crypto tax rate to 20% and is trying to pass it in 2026. https://t.co/4eX7UBJrzR

— Sota Watanabe (@WatanabeSota) December 1, 2025

Stock and fund gains are taxed at a flat 20%, a system investors already understand. Matching this rate for crypto is meant to put digital assets on the same level as traditional markets.

Support for reform grew after Japan’s Financial Services Agency suggested changes in late 2024. Lawmakers are now drafting updates to the Financial Instruments and Exchange Act. The changes aim to lower taxes and improve investor protections, including stricter insider trading rules and better disclosure for crypto firms.

Japan has long been strict with crypto after past exchange failures. This shift shows a move toward supporting growth while still regulating risk.

How Investor Protections Are Shaping Tax Reform?

One of the key challenges for regulators is finding a balance that protects markets while encouraging innovation. For years, Japan’s crypto sector has said that high taxes discourage users from staying on legal, regulated platforms.

Many investors postponed selling profitable assets due to tax concerns. Others took their trading activities overseas. Both results weaken Japan’s financial system and broader digital economy. The government is now aiming for a “solid investor-protection framework” alongside tax revisions. Potential measures include:

• Improved monitoring of platform compliance.
• Stricter protection of trading data.
• More transparent reporting.

These actions indicate Japan is modernizing oversight rather than easing it. The country seems focused on keeping investors safe while ensuring markets remain active and healthy.

Crypto companies also want clearer rules for corporate holdings. Taxes on unrealized gains have made running Web3 projects in Japan difficult. New rules could reduce these problems and keep companies from leaving.

Progress in Japan’s Crypto Tax Reform

The Japan Blockchain Association, the country’s main crypto lobby, has been pushing for tax reform for almost three years. In 2023, it asked regulators to apply the same 20% rate used for stocks, saying current rules make it hard for companies to innovate and for ordinary people to join in.

Crypto advocates point to growing competition in Asia. South Korea, Singapore, and Hong Kong have introduced clearer rules to attract blockchain and fintech development. Japan, once a leader in crypto licensing, risks losing its advantage.

The situation may be changing soon. The FSA plans to present its proposal in the National Diet’s 2026 session. If approved, it could be one of Japan’s biggest crypto policy updates in years. The process is long, but the direction is clear.

What Does a Lower Crypto Tax Mean?

A simpler tax system could quickly influence behavior once it is in place. Lower taxes generally lead to more trading activity, increased business creation, and a stronger presence in the national market. Investors who were cautious before may start seeing digital assets as an important part of their portfolios.

A 20% tax rate alone does not guarantee growth. Still, it provides a clearer direction and removes a significant psychological barrier that has limited the industry.