Yomiuri: Govt Considering Changes to Cryptocurrency Regulations

By Miyabi Endo / Yomiuri Shimbun Staff WriterThe Financial Services Agency has begun considering changes to laws related to cryptocurrencies, such as bitcoin, it has been learned. In response to the growing popularity of cryptocurrencies, the agency may legally position them as financial products and strengthen regulations on them to protect users.If these revisions are enacted, the tax rate on profits from cryptocurrency transactions could be significantly reduced from the current maximum of 55%.Cryptocurrencies, such as bitcoin, are currently classified as "payment instruments" under the Payment Services Law. However, even as cryptocurrencies have gained prominence as investment vehicles, there has been no end to the problems that have arisen in connection with unregistered trade brokers.In light of this situation, the FSA is considering having cryptocurrencies reclassified to instead put them under the purview of the Financial Instruments and Exchange Law.Since last autumn, the FSA has held numerous closed-door expert study groups on cryptocurrency regulation. It will soon publish a report and invite public comment. The report will state that the number of cryptocurrency accounts has exceeded 12 million and the balance of deposits has reached over 5 trillion yen. It will explain that "given these circumstances, they should be categorized as an investment vehicle."In regard to user protection, the report will call for the government to require companies issuing cryptocurrencies to disclose company profiles and transaction information, as well as for penalties on unregistered companies to be increased. It will also call for the government to consider stricter regulations on companies that solicit investment and the establishment of a system to prevent insider trading.The FSA will consult with the Financial System Council, an advisory body to the prime minister, as early as this summer and aim to submit a bill to revise relevant laws to the ordinary Diet session in 2026. The FSA also plans to continue discussions on lowering tax rates, with an eye toward submitting a request to reform tax laws that affect cryptocurrencies.Japanese law currently classifies profits from cryptocurrency transactions as "miscellaneous income," making them subject to a maximum tax rate of 55%. In contrast, the tax rate for stocks and bonds that are subject to the Financial Instruments and Exchange Law is a flat 20%, so it is possible that the tax rate for cryptocurrencies will be reduced to a similar level.This article is from The Yomiuri Shimbun. Dow Jones Newswires and The Wall Street Journal were not involved in the creation of this content.