"Japan to cut virtual asset tax rate to 20%... applicability limited to 'specific assets'"

The Japanese government has announced plans to overhaul the virtual asset taxation system through the 2026 tax reform. However, the tax rate cut benefit is expected to be limited to 'specific virtual assets', not all virtual assets.

On the 29th, crypto-focused media CryptoNews reported that Japan is pursuing a measure in the draft 2026 tax reform recently released to apply a single tax rate of 20% to investment gains from virtual assets. Currently in Japan, capital gains from virtual assets are included in comprehensive taxation and are subject to rates up to 55%.

If the reform is implemented, virtual asset gains will be taxed at a level similar to financial products such as stocks and investment trusts. The government aims to expand market participation by individual investors, which had been dampened by excessive tax burdens.

The Nihon Keizai Shimbun (Nikkei) reported that the tax reform would classify virtual assets as a separate category of financial assets. Kimhiro Mine, CEO of Pinoject, assessed, "As virtual assets become subject to the revised Financial Instruments and Exchange Act, investor protection mechanisms are strengthened, creating an environment in which more investors can more easily accept virtual assets."

However, the scope of the tax rate cut is limited. According to reports, the reform will only apply to 'specific virtual assets' handled by businesses registered in the register of Financial Instruments Business Operators. Major virtual assets such as Bitcoin and Ethereum are likely to be included in that category, but specific operator requirements and the scope of assets have not yet been clearly presented.

Loss treatment will also be improved. From next year, losses resulting from virtual asset trading will be allowed to be carried forward and deducted for up to 3 years. Losses can be offset against profits in subsequent years, which is expected to alleviate tax burdens.

Alongside the reform, product expansion is also being pursued. After the law is revised, the establishment of investment trusts that include virtual assets is expected to be permitted, and Japan has already launched an XRP exchange-traded fund (ETF). Authorities have also stated a goal of introducing two additional ETFs linked to specific virtual assets in the future.