In a significant move aimed at promoting increased Web3 participation in Japan, the Japan Blockchain Association (JBA) recently submitted a petition to the authorities regarding the taxation system for crypto assets. Led by Yuzo Kano of bitFlyer Inc., the JBA highlighted that the current tax regulations act as a major hurdle for companies engaged in Web3-related businesses and obstruct the active holding of digital assets by the public.

Requests Made by the Japan Blockchain Association:

1. Elimination of year-end unrealized gain taxation on companies holding third-party-issued crypto assets:
The JBA emphasized the need for revision of the tax rule concerning year-end unrealized gains on third-party-issued tokens. This particular tax regulation poses challenges for domestic capital companies venturing into Web3. The JBA believes that by scrapping this tax, companies will be relieved from selling their crypto-assets solely to balance their tax obligations, thereby encouraging greater participation and investment in Web3 ventures.

2. Amendment to the taxation method for individual trades:
The JBA proposed a change in the individual trades’ taxation method, suggesting the introduction of a uniform tax rate of 20% under self-assessment separate taxation. Additionally, they requested the authorities to allow the carry forward and deduction of any losses for a period of three years from the year following their occurrence, as this measure will help reduce tax burdens on traders.

3. Abolishing tax on the exchange of crypto-assets:
The JBA made a compelling case for the abolition of income tax on profits made by individuals when swapping one crypto asset for another. With the mainstream adoption of crypto trading, imposing taxes on these exchanges will become increasingly challenging and inconvenient. By eliminating this tax, Japan can foster a more thriving and accessible crypto ecosystem.

The Japan Crypto Asset Trading Association (JVCEA) reports a significant surge in interest within Japan’s Web3 space. The total number of crypto asset trading accounts has increased by 6.8 million as of April 2023, indicating a growing appetite for digital asset investment among locals. Prime Minister Fumio Kishida has also expressed a strong commitment to the development of the Web3 sector, highlighting its potential as a disruptive force capable of driving social change.

The Japan Blockchain Association’s petition to review and revise the taxation system for crypto assets is a significant step towards fostering a thriving Web3 ecosystem in Japan. By addressing the specific concerns and requests put forward by the JBA, authorities can facilitate increased participation, innovation, and economic growth within this emerging industry. As Japan embraces the transformative power of Web3, it stands poised to become a recognized leader in this new form of capital and contribute significantly to the global digital economy.

Disclaimer: The information provided in this research report is for informational purposes only and should not be interpreted as financial or investment advice. The NFT and cryptocurrency market is highly volatile, and readers should conduct thorough research before making any investment decisions.