It is the first nation to have a legal system that explicitly regulates cryptocurrency. In April 2017, Japan declared cryptocurrencies to be legal tender, that is as a mode of payment. After the nation was the victim of the Coincheck breach, the nation’s watchdog FSA toughened the regulations for cryptocurrency exchanges in 2019. The theft of more than $500 million in cryptocurrency made this hack one of the biggest at the time.
Since that time, all cryptocurrency exchange businesses have been required to follow the nation’s anti-money laundering and financial terrorism regulations.
Japan has continued to propose further laws and restrictions for the cryptocurrency industry since the 2019 update. The county launched a programme in 2021 to govern the DeFi activities. Japan implemented a law that only allowed licenced entities to issue stablecoins as a result of the LUNA stablecoin crash.
The Japan Cryptoasset Business Association (JCBA) and the Japan Virtual and Crypto assets Exchange Association (JVCEA), two of the most influential lobbying organisations, are reportedly working on a proposal to submit to Japan’s Financial Services Agency (FSA) this week.
The same issues have been brought up by politicians from different parties as well. One of the most outspoken politicians on the subject is Masaaki Taira, a member of the ruling Liberal Democratic Party. He has been urging his coworkers to relax the rules in order to “stem the outflow of digital talent.”
Some cryptocurrency companies have already left Japan as a result of high taxes and stringent restrictions. The majority moved to Singapore, which was the friendliest and nearest country
It will give revisions to the present tax code to lower the cost of keeping and distributing cryptocurrency, according to an official letter obtained by Bloomberg. For companies and up to 55 per cent for individual investors, Japan presently taxes all cryptocurrency investment profits, both realised and unrealized, at a rate of 30 per cent.
The proposal might recommend a reduction in these percentages. If no short-term corporate interests are involved, it will offer to make all profits on cryptocurrency earnings tax-free. However, it will suggest a set rate of 20% for investors who are individuals.