Japan's 20% Crypto Tax Aims to Make It a Global Digital Asset Hub

Japan is set to implement a flat 20% tax on cryptocurrency gains, aligning digital assets with equities and investment trusts under a major regulatory overhaul. The move, supported by the government and ruling coalition, aims to reduce the current progressive tax structure that can reach up to 55% and is expected to be formalized in the 2026 tax reform package. The shift reflects a growing view among regulators that cryptocurrencies have matured into a mainstream investment class, with the Financial Services Agency (FSA) preparing to reclassify major tokens like Bitcoin and Ethereum as financial products under the Financial Instruments and Exchange Act.

The proposed tax change will categorize crypto profits under a separate taxation framework, splitting the 20% levy between the national government (15%) and local authorities (5%). This aligns with the treatment of traditional securities, where gains from equities and investment trusts are already taxed at a uniform rate. Currently, Japan's progressive system for crypto gains—reaching as high as 55% for high earners—has discouraged domestic trading and distorted investor behavior, according to officials. By simplifying the tax structure, lawmakers hope to stimulate trading activity, attract institutional investors, and bolster Japan's digital-asset industry.

Data from the Japan Virtual and Crypto Assets Exchange Association underscores the potential impact: spot trading volumes on local exchanges reached $9.6 billion in September 2025, with approximately eight million active crypto accounts in the country. The reform is expected to generate higher overall tax revenue despite the lower rate, as increased trading activity offsets the reduced per-transaction levy. Asset managers, including Nomura and Daiwa, are already preparing product strategies to capitalize on the anticipated regulatory clarity.

The FSA's broader regulatory push includes mandatory disclosures and insider trading prohibitions for crypto, mirroring rules for conventional investments. This aligns with Japan's efforts to strengthen investor protections, such as requiring crypto exchanges to hold liability reserves to compensate users in case of breaches. Meanwhile, the government's separate-taxation framework ensures crypto profits are treated independently from wages or business earnings, a structure already used for income streams like royalties.

Globally, Japan's approach contrasts with other jurisdictions. While Spain's left-wing party recently proposed a 47% tax on crypto gains, Japan's 20% rate positions the country as a competitive hub for digital assets. The reform is slated to be included in the 2026 tax policy outline, with finalization expected by year-end. Asset managers and institutional players are closely watching the rollout, as the changes could catalyze a surge in demand for crypto-related products and infrastructure.