- Japan’s FSA is reviewing crypto regulations to assess investor protection.
- The review may reduce crypto tax rates from 55% to 20%.
- The initiative responds to industry calls for easing regulations that hinder innovation.
Japan will reevaluate its cryptocurrency regulations, potentially easing taxes on digital assets and opening the door for domestic investment funds focused on tokens.
According to a Bloomberg report, the Financial Services Agency (FSA) will conduct a review in the coming months to assess whether the current regulatory framework, the Payment Services Act, is sufficient.
The FSA will examine whether existing rules, designed for payment functions, offer adequate investor protection, given that digital tokens are now primarily used for investment. This could lead to reclassifying cryptocurrencies under the Financial Instruments and Exchange Act, which governs financial securities.
Read also: Japanese Financial Giant SBI Backs Metaplanet’s Bitcoin Push
Market analyst Yuya Hasegawa of bitbank Inc. said this reclassification could bring “dramatic changes” to the sector.
Lower Taxes and New ETFs Possible
One key implication of a regulatory shift could be lower taxes on cryptocurrency gains, currently taxed at rates as high as 55%. Industry participants, including Hasegawa, want a 20% levy, aligning crypto with other investment assets.
The review could also lead to the removal of the ban on exchange-traded funds (ETFs) that include tokens, further strengthening the Japanese crypto market.
Read also: Japan Eases Crypto Regulations for Gaming Businesses
This review comes after longstanding calls from crypto industry leaders to ease regulatory constraints. Japan’s regulatory environment is considered strict, shaped by past incidents such as the 2014 Mt. Gox hack and this year’s $320 million breach at DMM Bitcoin. DMM Bitcoin must submit a business improvement plan to the FSA by October 28.
While an FSA official declined to speculate on potential outcomes, the review is expected to continue through the winter.
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