Japan is preparing to introduce a flat 20 percent tax rate on major cryptocurrencies beginning in 2026, significantly lowering the current maximum tax burden that can reach more than half of trading profits. The policy change forms part of a broader overhaul of the country’s digital asset framework aimed at modernizing taxation and improving regulatory clarity.
The reform will apply to what regulators classify as specified crypto assets. These are digital currencies managed by firms registered under Japan’s Financial Instruments Business Operator Registry. Large market assets such as Bitcoin and Ethereum are expected to fall within the eligible group, although detailed criteria are still under review.
Loss carryforwards and investment treatment
Under the revised system, investors will be allowed to carry trading losses forward for up to three years. This aligns crypto taxation more closely with equity investments and provides a mechanism for offsetting future profits.
Cryptocurrencies covered by the new rules will be treated similarly to stocks and investment trusts for tax purposes. Officials say this change is intended to reduce administrative friction, standardize reporting obligations, and encourage long-term participation in regulated markets.
Expansion of crypto ETFs
The updated legal framework also opens the door for investment trusts and exchange traded funds that include cryptocurrencies. Japan has already approved its first XRP exchange traded fund and authorities have indicated that additional crypto based ETFs are under development.
All qualifying funds will be regulated under the Financial Instruments and Exchange Act, placing them under the same supervisory structure that governs traditional securities products.
Market impact and regulatory goals
Financial authorities expect that clearer tax rules and a lower rate will encourage greater retail and institutional involvement in Japan’s digital asset markets. Market observers note that regulatory certainty could support higher trading volumes while reducing reliance on offshore platforms.
The reform is part of a wider national effort to adapt financial regulation to emerging technologies and provide formal pathways for digital asset investment within Japan’s existing legal system.
By aligning cryptocurrency taxation with traditional securities and expanding access to regulated products, officials aim to integrate digital assets more deeply into the country’s mainstream financial sector starting in 2026.
