Japan plans to impose a 20% flat tax on cryptocurrency transactions and promote the issuance of ETFs through tax law revisions

On August 24, Nikkei reported that Japan's Financial Services Agency (FSA) plans to request a review of its treatment of cryptocurrency transactions starting in fiscal year 2026, mirroring its treatment for listed stocks.

The request, to be formally submitted by the end of August, includes moving cryptocurrency gains to a separate tax bracket subject to a flat 20% tax rate. As part of the tax reform, industry players are also requesting a three-year carryback of losses.

Currently, cryptocurrency income is considered "miscellaneous income" in Japan, subject to progressive tax rates up to 55%, excluding local taxes.

The FSA's proposal will also make it easier for Japanese companies to launch domestic cryptocurrency ETFs, boosting the competitiveness of the industry. In addition to the tax reform, the FSA plans to draft a bill in 2026 to include cryptocurrencies in the Financial Instruments and Exchange Act, classifying them as "financial products" rather than "means of payment" as regulated by the Payment Services Act.