Japan’s financial regulator is preparing to overhaul cryptocurrency regulations, potentially cutting crypto taxes and paving the way for an exchange-traded fund (ETF) for digital assets.
Crypto Review in Japan The need of the hour
Speak Speaking to Bloomberg on condition of anonymity, an official at Japan’s Financial Services Agency (FSA) said the agency will conduct a comprehensive review of existing crypto regulations in the coming months.
The primary focus of the investigation will be to determine whether the current method for regulating digital assets under the Payments Act is adequate.
In concrete terms, the FSA will assess whether the law provides sufficient investor protection. The source added that digital assets are mainly used for investment and speculation, and not as a medium of exchange.
One possible option is to reclassify tokens as financial instruments under Japan’s Investment Law. Commenting on this development, Yuya Hasegawa, a market analyst at crypto exchange BitBank Inc., said:
Reclassifying digital assets through the Financial Instruments and Exchange Act would strengthen investor protections and herald other dramatic changes.
Referring to these “dramatic changes,” Hasegawa added that such a shift in regulation could reduce tax rates on crypto gains from 55% to 20% – putting them on par with taxes on assets like stocks and other similar financial instruments.
Furthermore, this reclassification could pave the way for the launch of token-based ETFs, further integrating digital assets into Japan’s financial economy.
Japan is keen to regulate crypto despite previous challenges
Japan’s cautious approach to regulating digital currencies is not surprising, given the country’s history with Mount Gox, a now-defunct crypto exchange in Tokyo. hacked in 2014. In May 2024, Japan will exchange DMM Bitcoin fell victim of a similar hack, losing $305 million worth of digital assets.
Despite these accidents, the Japanese regulator did so made it has become abundantly clear over the years that it has no intention of “excessively” regulating cryptocurrencies – an approach that stands in stark contrast to neighboring China’s strict crypto laws.
A recent study found that most institutional investors in Japan are ready to enter the digital asset space within the next three years. However, crypto executives see even more room for less stringent laws that would help lower operating costs and boost growth.
Earlier this year, the Japanese government said implemented a policy change that allows venture capital and other investment firms to hold digital assets directly.
Crypto trading in Japan is witnessing a revival after a prolonged decline since 2022. Average monthly volumes through August 2024 on Japan’s centralized exchanges have risen to nearly $10 billion, compared to $6.2 billion in 2023.
Recently, the Japanese listed company Metaplanet Inc. the headlines revealed that it had added Bitcoin (BTC) to its balance sheet. BTC is trading at $62,761 at the time of writing, down 2.1% in the past 24 hours.
Featured image from Unsplash.com, charts from Bloomberg.com and TradingView.com