AI summary, for context:

Details of the Proposed Tax ReformDetails of the Proposed Tax Reform

• Current Tax Rate: Under the current system, profits from cryptocurrencies are classified as "miscellaneous income" and are subject to a progressive income tax rate of up to 55% (45% national tax plus 10% local tax), depending on the individual's total income. This high rate has been a significant barrier to investment.
• Proposed Tax Rate: The new proposal, advanced by Japan's Financial Services Agency (FSA) and the ruling government coalition, will introduce a flat 20% tax rate on crypto gains, aligning them with the taxation of stocks and investment funds. This includes a 15% national tax and a 5% local tax.
• Reclassification: As part of the reform, cryptocurrencies will be reclassified as "financial products" under the Financial Instruments and Exchange Act (FIEA), rather than "payment methods".
• Loss Carryforward: The proposed reforms include beneficial provisions allowing investors to carry forward losses for up to three years, which can be used to offset future gains. This is a major improvement from the current system, where crypto losses generally cannot be offset against other income or carried forward.
• Goal: The changes are intended to stimulate the domestic digital asset market, encourage investor participation, attract institutional capital, and position Japan as a leading Web3 hub in Asia.

The proposal is anticipated to be finalized as part of the 2026 tax reform outline.