Japanese Authorities Ease Tax Burden for Cryptocurrency Issuers

  • Japan updates corporate tax regulations, exempting unrealized gains from crypto assets, relieving burden on crypto firms and fostering innovation.
  • Revised tax rules and stablecoin framework in Japan foster talent, investment, and innovation in the crypto industry.
  • Tax relief and stablecoin regulations position Japan as a crypto haven amid US regulatory pressure.

Japan’s National Tax Agency (NTA) has implemented updated corporate tax regulations to provide clarity on how cryptocurrencies are treated. The recent notice states that companies will no longer be required to pay the current 30% corporate tax on unrealized gains from crypto assets.

The NTA has outlined specific conditions under which crypto assets will be excluded from a company’s asset valuation based on market value.

To qualify for the new tax exemption, a company must continuously hold the coins after issuance, while the crypto asset itself must be subject to transfer restrictions.

Previously, Japanese companies were obligated to pay a fixed 30% corporate tax rate on holdings, even if they hadn’t realized profits through sales. This policy has faced criticism for burdening crypto companies and hindering blockchain innovation, leading some businesses to relocate overseas.

Among those companies is Stake Technologies Pte., a Web3 infrastructure developer that moved from Japan to Singapore in 2020. Stake Technologies CEO Sota Watanabe expressed a desire to bring the company back to Japan if the government revised the corporate tax policy, according to a previous Bloomberg report.

Sota Watanabe, renowned as the founder of Astar Network, a smart contract platform built on Polkadot, expressed appreciation for the updated tax regulations, emphasizing that they will discourage Japan’s crypto companies from moving abroad. However, Watanabe emphasized the importance of extending the tax relief to include holdings of tokens issued by other companies. This expansion of the tax exemption would facilitate the growth of domestic projects within Japan.

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Japan Sets the Stage for Crypto Growth

As the United States imposes greater regulatory pressure on the crypto industry, evidenced by recent lawsuits against Binance and Coinbase for offering unregistered securities, Japan has revised its corporate tax regulations to foster a more favorable environment. While the SEC chair, Gary Gensler, criticized the crypto industry’s compliance standards and expressed reservations about digital currencies, Japanese stakeholders perceive an opportunity to attract talent and investment.

Noriyuki Hirosue, CEO of Tokyo-based crypto exchange Bitbank, highlighted that Japan’s regulatory landscape may differ from the tightening controls observed in the United States. This divergence presents a chance for Japan to establish itself as a favorable destination for crypto-related activities.

Furthermore, Japan has implemented a specific legal framework concerning stablecoins, which are virtual tokens designed to maintain stable prices through backing from traditional fiat currencies or commodities. The revised Payment Services Act, recently enacted, permits registered stablecoins for use as a means of payment. This progressive regulatory update positions Japan ahead of other nations in terms of stablecoin regulations, enabling businesses and individuals to engage in stablecoin transactions with a clear legal framework.

Nortitaka Okabe, CEO of JPYC, a Tokyo-based stablecoin issuer, emphasized Japan’s leading position in regulating stablecoins, offering a promising environment for their adoption and utilization within the country.

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