The Japan Blockchain Association (JBA), on July 27, formally submitted a petition to the authorities asking them to review and slash the taxes on crypto assets. According to the JBA, led by Yuzo Kano of bitFlyer Inc., the taxation system for crypto-assets is one of the “biggest barrier” for companies to run Web3-related businesses and the active holding of digital assets by the public, and as such, reviewing this taxation system can promote increased Web3 participation in the country.
“We hope that Japan will be recognized both domestically and internationally as a web3 advanced country, and that the economic sphere of her web3, which is a new industry, will expand and contribute greatly to the future growth of the Japanese economy, which is under pressure to change.” JBA’s statement read.
JBA’s Specific Requests
The JBA had three specific requests as part of its petition to the government. The first was to eliminate year-end unrealized gain taxation on companies holding third-party-issued crypto assets.
The JBA has highlighted that the year-end unrealized gain taxation on third-party-issued tokens is one of the tax rules that Japan’s National Tax Agency needs to revise. According to them, the tax rule is a stumbling block for domestic capital companies that want to venture into Web3.
They believe that if this particular tax is abolished, companies will no longer need to sell their crypto-assets to balance their tax books, and as such, this would further incentivize some companies to make their entry into Web3.
The second request was an amendment to the taxation method for individual trades to self-assessment separate taxation, introducing a uniform tax rate of 20%.
Total market cap holding tight at $1.146 trillion | Source: Crypto Total Market Cap on Tradingview.com
In addition, as part of the separate self-assessment taxation, the JBA is also asking the authorities to carry forward and deduct any loss for three years from the year following the year in which the loss occurred, as this measure will help reduce tax.
Last but not least, the association asked to abolish tax on the exchange of crypto-assets Currently, Japan’s tax agency places an income tax on profits individuals make whenever they swap one crypto asset for another.
The JBA has highlighted that this might become extremely difficult to enforce and, more so, be inconvenient to traders as crypto trading continues to gain mainstream adoption and become a mainstay in the economy. As such, they have called for the abolition of taxation on the exchange of crypto assets.
Japan A Growing Web3 Hub
The latest statistics from the Japan Crypto Asset Trading Association (JVCEA) reveal a growing interest in the Web3 space in Japan. According to the organization, more and more locals are opening crypto assets trading accounts, with the total number of accounts opened increasing by 6.8 million as of April 2023.
Japan’s Prime Minister Fumio Kishida also reiterated the country’s commitment to developing the Web3 sector and described it as the “new form of capitalism,” highlighting its disruptive power and how it can transform the internet and bring about social change.