Japan is preparing to significantly reduce the tax burden on cryptocurrency earnings, proposing to lower the maximum tax rate from 55% to 20%. This move would align cryptocurrency profits with other financial assets such as stocks, creating a more favorable environment for crypto investors.

The reduction aims to address concerns about the heavy tax load currently imposed on crypto gains, which has long been a point of contention for both retail and institutional investors. With this reform, Japan aims to foster growth in the crypto sector and make digital assets a more viable investment option within its economy.

The Financial Services Agency (FSA) of Japan has pushed for the reclassification of cryptocurrency as a financial asset, suggesting that it should be treated similarly to traditional investments. This proposal is part of a broader fiscal reform effort set for 2025, with the goal of easing tax regulations for individual and corporate crypto holders.

The FSA’s recommendations include a flat 20% tax rate, as well as potential provisions for loss carryover deductions. By simplifying the tax structure, Japan hopes to stimulate more active participation in the digital finance market​.

The proposed tax reduction is expected to help grow Japan’s crypto trading population, with estimates suggesting that the number of daily crypto traders could increase from 350,000 to 500,000 by the end of this year. The move is seen as part of a larger strategy to double asset income and encourage asset formation within the country.

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