Powerful crypto lobbying groups in Japan are calling on the government to lower current tax rates in the crypto industry. The groups are pushing the government to reduce digital assets’ high levies to prevent brain drain.
According to Bloomberg, the groups are drafting a proposal to submit to the country’s Financial Services Agency (FSA) later in the week.
Meanwhile, the lobby groups are not the only ones concerned with the direction of the crypto industry in Japan. Politicians across party lines have echoed the same worry as well.
Masaaki Taira, a member of the ruling Liberal Democrat Party, was the most vocal politician who took up the issue.
Taira has been making moves to convince his colleagues in Parliament to loosen up the strict regulations that will affect the industry. The outflow of talents in the digital space has been the most talked-about in the Japanese crypto sphere.
Group Calls for Changes in Tax Rates
According to the content of an internal memo, as obtained by Bloomberg, the proposal calls for readjustments to the current tax policy. The aim is to make the issuance of and holding of cryptocurrencies cheaper.
Meanwhile, all crypto-related profits are taxed by Japan, both for realized and unrealized gains. In addition, the tax rate is nearly 54% for individual investors and 30% for corporate investors.
Furthermore, the proposal will offer to reduce the tax percentages and make all earnings from crypto trading tax-free. This is subject to the fact that the gains accrued are not for short-term investment for corporations. On the other hand, the proposal suggests a fixed tax rate of 20% for individual investors.
Bloomberg reported that the FSA has been deliberating on reducing the tax rate for some time. However, the regulator did not reveal whether it is considering adding the new suggestions from the lobby groups in its annual tax revision.
Japan’s Crypto Regulations
The Asian country is the first to suggest a legal system for regulating cryptocurrency. Since April 2017, Japan has recognized crypto tokens as legal tender.
Moreover, in 2019, the watchdog updated the regulations for crypto exchanges after the Coincheck hack, which affected the Japanese crypto market.
At the time, the attack was one of the biggest to roast the whole crypto industry as the hackers wiped over $500 million in digital assets. After the unfortunate incident, every crypto exchange in Japan must comply with the FSA’s guidelines aimed at combating money laundering.
Japan did not stop at the 2019 rules revamp as it continues to include more guidelines for the crypto space. Last year, the country began to prepare regulations for the decentralized finance (DeFi) space.
Following the crash of the Terra LUNA ecosystem, the country restricted the supply of stablecoins only to licensed digital financial institutions.
Meanwhile, high taxes and strict regulatory enforcement have pushed many crypto exchanges out of the country. Most find solace in the closest countries, like Singapore, which has a friendly investor policy as Asia braces for crypto dominance.