Japan has supported a flat tax of 20% on cryptocurrency profits

Key points:

• The authorities are moving from a progressive rate of up to 55% to a flat tax of 20% on cryptocurrency profits, dividing it between the national budget and the regions.
• The reform will equate digital assets with stocks and funds, which will reduce the outflow of traders abroad and strengthen market liquidity.
• The FSA is preparing a bill for 2026.

The Japanese government and ruling coalition have supported the Financial Services Agency’s (FSA) proposal to introduce a flat tax of 20% on profits from digital assets. Currently, profits are taxed at a progressive income tax rate, which for some traders can reach 55%.

This level of taxation has harmed the market: some investors have moved abroad, and domestic trading volumes have declined. The new approach should remove barriers and make the system more understandable.

New rules

According to Nikkei Asia, the FSA intends to submit a bill to the 2026 parliamentary session. The reform sets a fixed rate of 20%, similar to the tax on stocks and investment funds. The revenue will be distributed between national and regional authorities: 15% and 5%, respectively.

A separate tax regime will place cryptocurrency profits in their own category. This will prevent investors from mixing income with wages or business income and allow for more accurate tax liability projections.

The reform also includes regulatory changes. Digital assets will be reclassified as financial products and will fall under the Financial Instruments and Exchange Act. Exchanges and custodial services will face stricter disclosure requirements, and the use of confidential information in trading will be prohibited.

Additional measures confirm the government’s intention to comprehensively update regulations. In 2026, the FSA will introduce requirements for exchanges to create reserves to cover customer losses after hacks. This will strengthen the protection of retail investors and bring crypto exchanges up to the standards of traditional brokers.

The regulator is also considering allowing banks to buy and hold cryptocurrencies. If the plan is approved, banking groups will be able to operate licensed exchanges, reinforcing Japan’s strategy to become a major regional crypto hub.