Japan proposes reclassifying crypto, paving way for ETFs and lower taxes

Japan’s FSA proposed classifying crypto as financial products, potentially allowing ETFs and a flat 20% capital gains tax.

Japan’s Financial Services Agency (FSA) proposed a sweeping reclassification of cryptocurrencies that would clear a path for the launch of crypto exchange-traded funds (ETFs) and introduce a flat 20% tax on digital asset income.

The proposal, introduced on Tuesday, suggests recognizing crypto as “financial products” under the scope of the Financial Instruments and Exchange Act (FIEA), the same regulatory framework that governs securities and traditional financial products.

The proposed reclassification could also shift Japan’s current progressive tax system, which taxes crypto gains at rates up to 55%, to a uniform 20%, mirroring the treatment of stocks. That change could make crypto investing more attractive to both retail and institutional players.

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