Japanese financial regulator, the Financial Services Agency (FSA) has been overlooking the nation’s crypto industry very strictly. Japan seems to have changed its stance towards cryptocurrency and has implemented some permissive regulations to foster crypto growth and, at the same time, closely monitor crypto-based entities.
The nation seems to be open to regulating cryptocurrencies and has also recognized the Japan STO Association and the Japan Virtual Currency Exchange Business Association (JVCEA) as self-regulatory groups for derivative transactions and security token offerings of crypto assets, earlier this year.
Should crypto be taxed at a flat rate of 20%?
The Upper House budget committee meeting held in June also saw lawmaker Takeshi Fujimaki ask Deputy Prime Minister and Minister of Finance, Taro Aso, about the possibility of changing the crypto taxation laws. Fujimaki believes that crypto should be put in a separate tax slab like stocks, and have a uniform tax rate of 20%.
While this move would greatly benefit the crypto industry in Japan and would encourage more investors to get into cryptocurrency, minister Taro Aso recently stated that he isn’t in line with the idea of lowering taxes on cryptocurrencies and treating it the same way as stocks.
Aso’s response comes after a question from Japan Restoration Association member Shun Otokita at a meeting of the House of Councillors Committee on Financial Affairs which convened on June 2. Aso said:
“Out of 1900 trillion yen [17.6 billion USD] financial assets held by households in Japan, around 900 trillion yen [8.4 billion USD] is now being held as cash deposits and that is abnormal.”
According to the minister, investors in Japan wouldn’t be convinced to put their cash into crypto since the country still has many cash-based businesses and individuals who keep their savings liquid. Hence, he comes to the conclusion that tax rates need not be lowered
All crypto-related income in Japan coming from trading, mining, and lending is taxed under the miscellaneous income slab and is subject to tax rates up to 55%. Stocks, on the other hand, are taxed at a flat rate of 20%, something pro-crypto legislators have been pushing to include digital currency.
In addition to taxation legislation, Otokita had also enquired with the FSA whether it was appropriate to cut the leverage cap for cryptocurrency margin trading to 2x. The leverage limit was lowered from 4x with the introduction of the Payment Services Act (PSA) and Financial Instruments and Exchange Act (FIEA) that came into effect on May 1.
The financial watchdog stated that this decision was taken after discussing the matter with crypto experts and FX insiders, taking comments from the public into account as well. The agency believes that lowering the leverage cap would lower risks from crypto volatility and avoid situations like Black Thursday.