Tax Reform Request for Crypto
Assets(FY2024)

July 28th, 2023
Japan Blockchain Association

Tax Reform Proposal for Crypto Assets (FY2024)
Introduction
Requests for Tax on Crypto Assets ................................................................ 1
1. The purpose of this request ................................................................. 3
2. The Current Status of Crypto Assets and Blockchain ............................. 4
2.1. Crypto Asset Trends ...................................................................... 4
2.2. Outflow of Human Resources to Foreign Countries ......................... 5
3. Survey Results .................................................................................... 7
3.1. Overview ...................................................................................... 7
3.2. Annual Income Distribution ........................................................... 7
3.3. The Current Status of Realized Gains and Losses on Crypto Assets .. 7
3.4. Opinions on Separate Declaration Tax ............................................ 93.5. Impact on Investments ................................................................. 93.6. Impact on Tax Revenue ............................................................... 10
4. Request Details ................................................................................. 11
4.1. Elimination of year-end unrealized gains tax for companies whichhave third-party issued crypto assets .......................................... 11
4.1.1. Current Status and Issues...................................................... 11
4.1.2. Request................................................................................. 124.2. Separate Declaration and Carry Forward Deductions .................... 16
4.2.1. The Current Status and Issues ............................................... 16
4.2.2. Requests ............................................................................... 18
4.3. Eliminating Tax on Crypto Assets at the Time of Exchange ............ 18
4.3.1. Current Status and Issues...................................................... 18
4.3.2. Requests ............................................................................... 21
Conclusion ............................................................................................... 22

Introduction
The world has been closely watching the concept of web31, a new digital economic
sphere in which autonomous users are directly connected to each other on adecentralized network based on blockchain technology, without depending on a
specific platform. web3 is also thought of as a next generation internet. It is a once
every 30 years innovation that has come after the IT revolution and has thepotential to drive economic growth in Japan and around the world.
On the other hand, Japan's web3 related businesses are beginning to fall behind
the rest of the world due to the heavy tax burden and vague rules for crypto assets
defined in the revised Funds Settlement Law and crypto asset derivatives definedin the Financial Instruments and Exchange Law (hereinafter collectively referred toas "crypto assets"). The percentage of budding entrepreneurs in Japan is very low
compared to other countries. Many of these limited entrepreneurs are focusing on
web3, but talented web3 personnel are becoming discouraged by the Japanesebusiness environment and continue to leave the country.
In the borderless web3 era, there is a high possibility that using crypto assets that
do not depend on a specific country will become the mainstream for payments, andin order to improve the environment for the promotion of web3, it is most importantto review the Japanese crypto asset tax system, which is disadvantageouscompared to the global standard. Under such circumstances, the cabinet approved
the elimination of year-end market value tax for crypto asset issuers in the 2023
tax reform on the 23rd of December 2023, and it is highly praiseworthy from aninternational competitiveness perspective that one of the themes pointed out as aproblem in the tax system related to web3 has been reviewed.
However, the reality of the web3 industry applying blockchain technology in theearly days of the market changes drastically every day, and there are still
discrepancies between the application of the technology by recent entities and thetax system.

1

Referred to as "web3" in this document. However, the referenced documents use the notation"Web 3.0".

We, the Japan Blockchain Association (hereinafter referred to as "JBA" 2 ), havecontinued our liaison activities on taxing crypto assets and various institutional
designs as an organization formed by renaming the Japan Value Recording Business
Association, the predecessor of JBA, which was founded in September 2014. It is
probably the oldest existing web3/blockchain-related organization in the world. In
the area of tax, it has achieved some results like requesting that crypto assets be
exempt from consumption tax and achieving tax system reforms. Recently, JBA
board members and advisors have increasingly moved their business overseas toconduct web3 business, and they strongly feel that the arrival of the web3 era is agreat opportunity for Japan, but there is also the risk of turning a lost 30 years into
the lost 50 years. As a national strategy, we strongly hope that the tax reform for
crypto assets will be implemented this year as well, so that Japan can once morelead the world in the web3 era, as it did in 2017 when it was the leading country
for crypto assets.

2

174 member firms (as of June 30, 2023) https://jba-web.jp/aboutus#overview

Requests for Tax on Crypto Assets
Request 1: the elimination of year-end tax on unrealized profits forcorporations holding crypto assets issued to third parties
Eliminate the year-end unrealized gains tax on crypto assets other than for those
held for short-term trading purposes by companies that have acquired crypto assets
issued by third parties, and replace the year-end market value tax on these assets
with a book value assessment. Eliminate the year-end unrealized gains tax on thirdparty-issued tokens, which is a factor in the current high barriers to entry fordomestic capital enterprises in the blockchain industry, to encourage new web3
industry participants and promote an environment where domestic companies canoperate web3 businesses.
Request 2: the introduction separate tax for tax returns and loss carryforward deduction
The method of taxing profits on crypto asset transactions by individuals should bechanged from comprehensive tax to separate tax on declaration, at a flat rate of
20%. Furthermore, the taxpayer shall be allowed to carry the losses forward forthree years from the year following the year in which the losses are incurred anddeduct them from the amount of income related to crypto assets in the following
year and thereafter. The same approach should be applied to crypto asset derivativetransactions. Additionally, as it is difficult for crypto asset exchangers to obtain theacquisition price of crypto assets for their customers who frequently transfer theseassets between overseas and domestic companies, we request that there be a
separate tax for declarations instead of separate withholding taxes.
Request 3: the elimination of tax for crypto asset exchanges
When individuals trade crypto assets, they are subject to income tax on the gains
generated every time a trade takes place. In the borderless web3 era, exchanging
crypto assets is likely to become mainstream in economics, and calculating the tax
involved becomes very complex due to the wide range of transactions that happen
and the types of crypto assets traded, which significantly hinders the convenience
factor inherent in crypto assets. Therefore, the tax on the trading crypto assets
should be eliminated.
Innovative services brought about by new technologies, like blockchain technology1

based crypto assets, NFT3, and DeFi4, have the potential to overthrow the principles
and ideas that conventional legal framework and various systems are based on. So,
we seek active discussion from industry, government, and academia, without beingtied down by existing frameworks, in examining environmental improvements forthe promoting web3, and we request that work begin first on crypto asset tax
reform, which we believe is of the utmost importance.

3

Non-Fungible Token

4

Decentralized Finance21. The purpose of this request
The Basic Policies for Economic and Fiscal Management and Reform policy,
approved by the cabinet on the 16th of June 2023, clearly states that "thegovernment will improve the environment for the utilization of web3 tokens and therevitalization of the content industry, and will take necessary measures to expand
the base of players and ideas," and web3 continues to be positioned in Japan's
national strategy for economic growth. This request is a part of web3's national
strategy for Japan's economic growth. This letter requests a review of tax on crypto
assets, which is the biggest hurdle for companies operating web3 businesses inJapan and a disincentive for the public to actively own and use crypto assets.
The cabinet's decision on the 23rd of December 2023 to get rid of the year-end
mark-to-market tax on crypto asset issuers in the 2023 tax reform has beenrecognized both domestically and internationally as an indication that Japan isconstantly considering the design of a system suitable for the web3 industry.
Creating an environment suitable for web3 as a new industry and achieving
international industrial competitiveness should greatly contribute to the medium
and long-term growth of the Japanese economy. To this end, we believe it is very
important to implement the tax reforms recommended in this request.

3

2. The Current Status of Crypto Assets and Blockchain
2.1. Crypto Asset Trends
In October 2008, Satoshi Nakamoto published an article online called Bitcoin: A
Peer-to-Peer Electronic Cash System5, in which he described the birth of Bitcoin as
a new form of payment based on encrypted proofs, rather than centralized trust by
financial institutions. Bitcoin was born. In the 15 years since, the total market valueof crypto assets, including Bitcoin, at one point exceeded 300 trillion yen6 (as ofNovember 2021), and crypto assets are actively traded around the world. The global
average crypto asset ownership rate for internet users aged 16-64 is 11.9%7, while
in Japan the rate is below average at 5.0%.
Data for the United States, the United Kingdom, Germany, South Korea, andSingapore show 13.8%, 9.4%, 9.0%, 13.3%, and 15.3% respectively, suggestingthat crypto asset penetration in Japan is far below other developed countries.
However, statistics8 from the Japan Virtual and Crypto assets Exchange Association(JVCEA) indicate that the number of users of trading accounts of crypto asset
exchangers in Japan is steadily rising, especially from around 2019, with as manyas 6.8 million accounts opened by April 2023, and a certain number of Japanesecitizens have invested in crypto assets.
As of June 2011, when the Upper House passed a law changing the tax system forover-the-counter foreign exchange margin trading from a general tax system to a
separate tax system, the number of trading accounts in Japan was approximately
3.61 million 9 . We recognize that the number of customers is important when
discussing tax reform for crypto assets, and we believe that the number of users
has reached a certain scale.

5

https://bitcoin.org/bitcoin.pdf

6

CoinMarketCap https://coinmarketcap.com/ja/charts/

7

DIGITAL 2023: GLOBAL OVERVIEW REPORT https://datareportal.com/reports/digital-2023-

deep-dive-blockchainsroadblocks?utm_source=Global_Digital_Reports&utm_medium=Partner_Article&utm_campaign=Digital_2023
8

JVCEA statistical data (released in June 2023) https://jvcea.or.jp/cms/wp-

content/themes/jvcea/images/pdf/statistics/202304-KOUKAI-01-FINAL.pdf
9

FFAJ statistical data (released in May 2022) https://www.ffaj.or.jp/wp-

content/uploads/2022/05/otc_fx_margin_volume_j.xls

4Figure 1: The Number of Crypto Asset Accounts in Japan
2.2. Outflow of Human Resources to Foreign Countries
As noted in 2.1 above, while crypto assets have made some progress in Japan,
Japanese web3 entrepreneurs are moving their bases to the Singapore, Dubai, andelsewhere. If this trend is left unaddressed, Japan's talented brainpower will be lostabroad, and the foundation for Japanese innovation in web3 will be lost andhollowed out.
Japanese web3 entrepreneurs cite Japan's crypto asset tax system as one of thereasons for moving abroad. In order for Japan to attract talented people fromaround the world and lead the world in the web3 era, the tax system for crypto
assets needs to be looked at again.
According to a report10 published by Coin cub, a crypto asset analysis company,
Japan's crypto asset ranking in the world as of the fourth quarter of 2022 is 15thout of 64 countries analyzed. While Japan was ranked 2nd for financial factors (outof 64 countries), regulatory (5th), and human resources (15th), it was ranked low
for crypto asset tax (55th).

10

Coincub Global Crypto Ranking: - Q4 2022 https://coincub.com/ranking-update2.pdf

5Prepared by JBA based in Q4 of 2022-coin cub Global Crypto Ranking
Figure 2: Global Crypto Asset Ranking

63. Survey Results
3.1. Overview
The JBA did a survey to understand the current condition of crypto asset ownership,
management, and tax awareness, and to consider the impact on crypto asset
investment if reform of the tax system reform is implemented. The survey was
carried out from the 16th of June 2023 (Friday) to the 23rd of July 2023 (Friday),and received 1,358 responses, far more than last year's which had 945. The survey
asked several questions necessary for tax reform, all of which were able to gather
in opinions needed for future tax reform.
3.2. Annual Income Distribution
The survey on the distribution of annual income among crypto asset holders gained
the following 1,358 responses.

Figure 3. JBA Survey Results (1)3.3. The Current Status of Realized Gains and Losses on Crypto Assets
The realized gains/losses on crypto assets held by respondents are below. There
were 1,358 responses.

7Figure 4: JBA Survey Results (2)Figure 5. JBA Survey Result (3)In addition, for the above question (confirmed profit), there was an extra follow up
question for those who answered "don't know," given below. There were 148
responses.

8Figure 6: JBA Survey Results (4)3.4. Opinions on Separate Declaration Tax
The majority of respondents were overwhelmingly in favor of a flat 20% separate
declaration tax, as shown below.

Figure 7: JBA Survey Results (5)3.5. Impact on Investments
Furthermore, when asked about the impact of a separate flat 20% tax on the9amount of crypto assets invested, only 135 respondents (9.9%, 106 (11.8%) lastyear) answered that they would not increase the amount they had invested in
crypto assets, while 1,223 respondents (90.1%; 90 (88.1%) last year) answeredthat they would increase the amount of their crypto assets investments. Of these,
596 (43.9%, compared to 341 (38.1%) last year) indicated that they would like tomore than double their investment.

Figure 8: JBA Survey Results (6)3.6. Impact on Tax Revenue
We request, among other things, that the tax on profits from crypto asset trading
be changed from general tax to a separate tax, and that the tax rate be uniformly
set at 20%. This is based on the results of a survey that showed the implementationof this request would have an impact on a wide range of income brackets in Japan.
By reducing the administrative burden of complicated calculations on tax returns,
this tax reform would increase the number of crypto asset users, increase theamount of investment in crypto assets, increase the amount of profit ascertained,
and improve proper tax reporting, which will contribute to tax revenues, and solimit the impact on tax revenues. The impact on tax revenues may be limited oreven increase in some cases. We would like to conduct ongoing research on theimpact on tax revenues.

104. Request Details
4.1. Elimination of year-end unrealized gains tax for companies which havethird-party issued crypto assets
4.1.1. Current Status and Issues
Article 61.2 of the Corporate Tax Law classifies crypto assets that fall under market
crypto assets as short-term trading instruments, and stipulates that short-term
trading instruments, shall be valued using the mark-to-market method. This
operation would also apply to crypto assets that are not intended to profit fromshort-term price fluctuations.
Recently, web3 companies (companies that develop businesses using blockchain
technology or funds that invest in them) do not acquire tokens for speculative or
short-term gains from trading, but are acquiring and holding tokens for medium tolong-term business development based on blockchain technology. JBA's interview
survey has revealed that such companies are acquiring and holding tokens not toacquire speculative or short-term trading margins, but to conduct medium to longterm business development based on blockchain technology. Since tokens
necessary for the above business development are not held for speculative or shortterm trading purposes, it is not expected that the tokens would be sold and used
as a source of tax payment for the sake of business continuity in the event thatmarket value tax is imposed at the end of the fiscal year. The current tax system,
which may impede business objectives, is currently a major obstacle to the national
strategy of growing web3 business.
If tokens had to be sold to pay tax by web3 companies, who aim to create a common
economic zone using the tokens, this would create selling pressure on the tokens,
resulting in a decline in their market value due to tax factors (rather than a decline
in their market value due to healthy business competition), As a result, the growth
process of the economic zone utilizing the tokens may come to a halt.
This situation is one of the reasons why web3 companies, which could become an
important pillar of the Japanese economy in the future, are forced to start theirbusiness in other countries where there is no year-end market value tax in order tosurvive international competition. This makes it difficult to create a strong domestic
token economy, create new web3 businesses, and strengthen the economic zone
for tokens already issued.

11

Figure 9: Consideration of utilizing third-party crypto assets for business and its
breakdown
4.1.2. Request
The tax method for crypto assets other than for short-term trading purposes heldby corporations that have acquired third-party issued crypto assets should bechanged from tax based on their market value at the end of the fiscal year to tax
based on their book value. The following types of business purposes require holdingof third-party crypto assets other than self-issuance, so we would like to propose acategorization of the purpose of holding such assets. This amendment will solve theproblem that is currently a major barrier to entry into the web3 business, and will
prevent the outflow of web3 personnel outside of Japan and promote therevitalization of the web3 business in Japan.

12Types of Third-Party Issued Crypto Assets to be Used in Business
No.

Type

Overview

Discussion Point

Number ofcompanies※

1

PoS Node

Proof ofwhen choosing validators, candidates are

Operation

Stakeconcerned about the burden of market value

networktax due to token holdings (for PoS), andmaintenancecandidates do not find them attractive.

83

and security
improvement2

Use ofDiversion ofSome layer 1 blockchains have the capability

Subnets

existing

to build their own blockchain for each businessnetworkor project, called a subnet (typical example:

subnets to

AVALANCHE).

web3
business

One of the requirements for launching such a
subnet is the possession of a native token of
the main net chain, whereby case the operator
launching the subnet must possess a certain
amount of tokens (crypto assets). The tokens
will be held for the duration of the subnet, andcannot be sold off. Therefore, it can be said
that the tokens are held for business purposes
rather than for investment purposes.

13

40

No.

Type

Overview

Discussion Point

Number ofcompanies※

3

Token-Creation of

For example, when implementing a company-

based

an economic

issued token in a blockchain game, it could be

Consortiu

zone using

difficult to account for it or aim for an IPO

m (Token

the same(there are almost no audit firms that will

allocation

token byaccept a company-issued token), and so, byfor joint

multiple

collaborating with other companies, thebusiness)companies.

limited-issue tokens issued by other companies

46

are implemented in the blockchain game.
In such cases, becoming a major holder of thelimited-issue tokens is essential to stabilize theprice of the tokens and increase their pricethrough marketing activities, but if the limitedissue tokens are held at the end of the fiscal
year and year-end valuation tax is assessed,
taxes must be paid in Japanese yen, so their
Japanese yen reserves will disappear and thecompany could easily be forced into
bankruptcy and find itself in a very difficult
cash flow situation.
4

Research

The purchaseIn developing blockchain-related services, it isandand holding

necessary to purchase and hold various crypto

Developmof various

assets for the purpose of research andent

crypto assets

development, in addition to gas expenses, andfor thetax risks arise with respect to such holdings.

purpose ofdeveloping
blockchainrelated
services

14

67

No.

Type

Overview

Discussion Point

Number ofcompanies※

5

Expenses

In addition to

Blockchain development costs and project

Requiredusing crypto

sales are paid for by crypto assets. Continuous

forassets forholdings are desirable to avoid price declines,

Businesssales ofbut carry tax risks. The cash flow strategy ofContinuity

developed

purchasing stablecoin at low prices is notproducts andfeasible. 40

40services, gas
costs will
also beincurred on aconstant
basis.
6

Necessary

CryptoAmong tokens issued by other companies thatExpenses

assets areare acquired through business activities,for

expected totokens issued by other companies, especiallyCompens

be used as

those related to blockchain games, may be

ation

incentive

given or transferred to executives, directcompensatio

employees, or outsourcing contractors asn and as a

incentive compensation with the permission of

way ofthe issuing company.

56

payingsalaries in

In order to make use of incentive

the future.

compensation flexibly, it is necessary to holdthese tokens issued by other companies for agiven period of time, but if such tokens areheld at the end of the fiscal year and subject
to year-end valuation tax, taxes may be
incurred, and the incentive compensation may
be of limited duration and continuously usefulto the company. It is difficult to designcompensation that is useful to the company on
an ongoing basis.

7

Token

CVC

In some cases, operating companies take part

Investme

investmentsin the initial round of web3 projects as part ofnt

in operatinga CVC investment. In this case, in addition tocompanies

equity investment in the issuer, they may also
get tokens, all of which have in common thatthey are expected to be held from the
beginning over the medium and long term.

15

60

No.

Type

Overview

Discussion Point

Number ofcompanies※

8

Other

Other

The principal portion of the investment isbusinesses

locked for a given period of time by contractual

not covered

clauses or smart contractual mechanisms, so

above.

that there will not be a taxable relationship-with price fluctuations.
It is for the business to make an economic
decision to choose which means of interest
generation they want to compensate for the
inflationary diminution in value of the principal
portion, but at least in the case of thesechoices, as long as the business has notchosen the economic behavior of acquiring
profits through short-term trading, it does not
fall under tax on unrealized gains and losses.
Tokens representing rights to gold or other-physical commodities may also come under
the category of crypto assets under Japan's
Funds Settlement Law.
In view of the purpose of using tokens as away of settlement, tax of unrealized
gains/losses at the end of the period before
they are used for settlement may be an
hindrance in achieving that purpose. As one of
the cases where the purpose is not to makemarginal gains from short-term trading, it canbe said that unrealized gains/losses should be
exempt from tax.

*These are the results of a questionnaire survey and do not represent an exhaustive
picture of the current situation.
4.2. Separate Declaration and Carry Forward Deductions
4.2.1. The Current Status and Issues
Currently, profits generated from trading crypto assets are classified as
miscellaneous income and are taxed together with other income as a lump-sum.
The maximum tax rate is approximately 55% together with income tax and16residents’ tax, and crypto assets are not allowed to carry forward deductions forlosses, which are allowed for other financial instruments.
Crypto assets have often been viewed as speculative, but in recent years, the Tax
Treatment of NFTs11, published in January 2023, has shown progress in the tax
treatment of NFTs, and there are high expectations for the expansion of theeconomic zone on the web3 due to NFTs' compatibility with Japan's abundant
content power. The web3 is not something that can be established by individual
elements such as NFTs and DAOs12, but can be realized by functioning as anintegrated ecosystem, and crypto assets are the most important assets within that
economic sphere.
Although crypto assets are currently categorized under the Funds Settlement Law,looking back to the past, "over-the-counter" foreign exchange FX transactions
were subject to the same general tax as current crypto assets, but the change toseparate tax encouraged the momentum "from savings to investment", and it ispossible that transactions in crypto assets will also be subject to separate tax. We
hope that transactions in crypto assets will also be subject to separate tax. The
maturation of the crypto asset market will be the foundation for the establishmentof web3 companies.
The web3 trend is similar of the early days of the internet, and it is difficult to see
how the future will develop. However, there is no doubt that the next era after the
one in which a few giant companies dominate the market is approaching, and it is
up to society how to respond. So Japan does not to fall behind, it is necessary tosupport web3 engineers and startups, and in fact, these projects require a large
amount of money. Raising these funds through crypto assets puts investors at atax disadvantage. The comprehensive tax system has become a barrier to entry
for individual investors. It is important for the development of the web3
environment and the realization of a virtuous economic cycle that growth capital
supplied by households through holding of crypto assets goes to web3 firms topromote economic growth, and the fruits of that growth promote households'
asset formation.

11

National Tax Agency JAPAN Tax Treatment of NFT (Information)

https://www.nta.go.jp/law/joho-zeikaishaku/shotoku/shinkoku/0022012-080.pdf
12

Decentralized Autonomous Organization17

Thus, the establishment of rules for the wider public acceptance of crypto assets
will contribute to the development of Japanese industry through the increase in
the number of web3 companies, the development and deployment of newservices, and the accompanying increase in employment. Therefore, it is vital torevise the tax rates currently imposed on crypto assets and make them at least at
the same level as those on other financial instruments.
The current harsh tax system not only discourages individuals from investing incrypto assets and prevents a virtuous cycle, but also encourages the use offoreign crypto asset exchanges that are not registered as crypto asset traders inJapan, leading to an outflow of assets.
4.2.2. Requests
The method of tax on profits of crypto asset transactions by individuals should bechanged from general tax of miscellaneous income to separate tax on declared
income, with a flat tax rate of around 20%. Additionally, the taxpayer should beallowed to carry over losses for three years from the year following the year inwhich the losses are incurred and deduct them from the amount of income related
to crypto assets from the following year onward. Crypto asset derivativetransactions should be treated in the same manner.
Since it is difficult for crypto asset traders, who frequently transfer crypto assets
between overseas and domestic vendors, to obtain the acquisition price of thecrypto assets of their customers, we request that tax be separate for declared
income instead of a separate withholding tax.
4.3. Eliminating Tax on Crypto Assets at the Time of Exchange
4.3.1. Current Status and Issues
Under current income tax law, when a crypto asset is exchanged for another(crypto to crypto), it is considered as though one crypto asset was used topurchase another, and income tax is imposed on the profit generated from thetransfer. Under the Income Tax Law, as stated in National Tax Agency Tax
Answer No. 310513, "Transfer means any act of transferring owned assets,
whether gratuitous or paid, and thus includes not only ordinary sales andpurchases but also exchanges, auctions, public sales, payment in kind, distribution
13

National Tax Agency Japan, Assets subject to transfer income and taxation method

https://www.nta.go.jp/taxes/shiraberu/taxanswer/joto/3105.htm

18

of property, expropriation, and contributions-in-kind to corporations." As stated,an "exchange" of assets is considered to be a transfer of assets.
In the borderless web3 era, the exchange of crypto assets that do not rely on
legal tender is likely to become mainstream, and the kinds of transactions that willtake place and the types of crypto assets that will be traded will vary enormously.
Consequently, tax calculations will be required every time profit is earned when
crypto assets are traded, which will be extremely complicated and may hinder theinherent convenience of crypto assets.
In an international comparison of tax methods for trading of crypto assets, within
the G7 the France has eliminated this tax, citing the number and complexity oftransactions that occur in a short period of time as the reason.

19

Category

G7+αCrypto-Country

Presence of Tax

Description

CanadaYes

Capital Gains Tax

Japan

Yes

miscellaneous income

FranceNo

Germany

Yes

Solidarity Tax

Italy

Yes

Substitutive Tax

United Kingdom

Yes

Capital Gains Tax

United States

Yes

Capital Gains Tax

India

Yes

Capital Gains Tax

Portugal

No (Yes in the future)

Luxembourg

Yes

Capital Gains Tax

Switzerland

No

Conditional (taxed if not a private

Friendly andothersinvestor)
Hong Kong

No

Conditional (Must be asset-based,
taxable if applicable to short-term
trades)Singapore

No

Capital Gains Tax

Dubai

No

Capital Gains Tax

Figure 10: International Comparison of Tax on Crypto to Crypto (as of July 2023)
The transfer of crypto assets is exempt from consumption tax as "similar to ameans of payment" under a 2017 tax reform14. If the characterization of crypto
assets as a means of payment is to be emphasized, it is considered sufficient totax crypto assets when they are actually used as a means of payment (e.g., when
crypto assets are exchanged for legal tender such as Japanese yen or used topurchase goods), and it could be reasonable to eliminate the tax on exchanging
one crypto asset for another.

14

National Tax Agency Japan, Tax-exempt transactions

https://www.nta.go.jp/taxes/shiraberu/taxanswer/shohi/6201.htm

20

In addition, exchanges between foreign currencies are currently taxed. However,there are very few cases where foreign currencies are exchanged without
involving Japanese yen. For example, since foreign exchange is a settlement of
exchange differences, it is in effect just a transaction that generates a profit orloss in Japanese yen. There could also be a case where a person travels the worldand exchanges currencies, but it would be a small transaction in terms of scale.
Moving abroad and exchanging foreign currency as a result of the move is not
subject to tax. There could be cases where a foreign currency deposit in Japan isfurther exchanged for a foreign currency, but most foreign currency deposits
handled by many banks are usually exchanged for foreign currency and yen.
So, tax on exchanging foreign currencies and tax on trading crypto assets havecompletely different probabilities of occurring. Crypto asset for crypto asset trades
occur frequently. In particular, there are cases in which a transaction is made with
the intention of exchanging crypto-assets, but a transaction is unintentionallymade over a third crypto asset in order to exchange that pair of crypto assets in atransaction. Since this fact is not known without examining the transaction, there
is often no awareness that this third crypto asset is being traded. If all of thesetransactions were to qualify as taxable, it would increase the complexity andcreate a disincentive for crypto asset transactions.
4.3.2. Requests
When individuals exchange one crypto asset for another, they are subject toincome tax on the gains generated every time the trade takes place. In theborderless web3 era of payments, the exchange of crypto assets is likely to
become the mainstream in the economy, and tax calculations will become
extremely complicated due to the wide variety of transactions that occur and thetypes of crypto assets exchanged, which significantly hinders the convenience
inherent in crypto assets. Therefore, the tax on the exchange of crypto assets
should be eliminated.

21

Conclusion
This report summarizes the JBA's three requests for tax reform regarding crypto
assets, a very important element for the realization of Japan's national strategy topromote web3.
As indicated in the National Tax Agency's 20th of June 2023 notice 15 , the JBA
appreciates that the business environment has been steadily improving over the
past year, as shown by the easing of year-end market value assessment tax on selfissued crypto assets. However, in light of the environment surrounding the web3
industry, which continues to change at rapid pace and is subject to fierce
international competition, and in light of the fact that the web3 promotion strategy
and the startup support that plays a role in this strategy have been set forth in thenational growth strategy, further tax easing is necessary for Japan to lead the worldin the web3 industry.
Although it is unlikely that all three requests will be realized in the tax reform offiscal 2024, we sincerely hope that they will continue to be considered in that caseas well.
In this fiscal year's request, we received many examples of crypto asset use andtax issues in such cases from JBA member companies, and this has enabled us todiscuss the issues with a higher degree of granularity. Using these materials, theJBA will continue to make efforts to contribute to the government's "new capitalism"
by removing barriers to the emergence of new industries through the web3
revolution, while the government, businesses, and related industry associations
unite and examine various types of cases.
Finally, we would like to express our gratitude once again to our customers wholove web3, crypto assets (virtual currency), and blockchain, to those who filled out
the survey, and to all government officials.

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National Tax Agency Japan, Partial Revision of Basic Notification of Corporate Tax, etc.

(Notification of Interpretation of Laws and Regulations)
https://www.nta.go.jp/law/tsutatsu/kihon/hojin/kaisei/2306xx/index.htm

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