Japan’s New Digital Transformation Minister Hints at Crypto Tax Reform

Masaaki Taira, Japan’s newly appointed Digital Transformation Minister, has hinted that he will push for crypto tax reform.

During a press conference after his appointment, Taira called for the “reform” of tax laws to help the nation’s “blockchain” sector.

Given Taira’s previous comments about the need for crypto tax reform, it appears clear he was referring to crypto tax.

🇯🇵 Japan's FSA @fsa_JAPAN is reviewing crypto regulations, potentially lowering taxes on gains and reclassifying digital assets!#Japan #Crypto #RegulatoryReviewhttps://t.co/NGdahdTZIr

— Cryptonews.com (@cryptonews) September 30, 2024

Crypto Tax Reform: Japan Inches Closer?

Per CoinPost, journalists asked Taira about the web3 sector. They asked “what kind of deregulation” would help “the spread of blockchain technology.” Taira replied:

“I think the most important thing is the tax system.”

However, the minister then appeared to temper this statement by suggesting that tax-related matters were out of his control. He explained:

“I’m not in a position to speak about the tax system, so I cannot comment on that matter.”

Journalists pressed him on these comments, asking him to clarify his answer. To this, Taira replied:

“Tax reform is the responsibility of the Financial Services Agency, so I will refrain from commenting on the matter. However, as a cabinet member and as the Digital Transformation Minister, I would like to speak about how using blockchain will have an impact on Japan’s economy and its financial situation.”

New PM’s Crypto Stance

Taira was speaking days after his appointment by Shigeru Ishiba, Japan’s new Prime Minister.

Ishiba, also the head of Japan’s ruling Liberal Democratic Party, revealed pro-blockchain and NFT policies late last month.

Taira’s appointment could prove a welcome boost for Japan’s crypto sector. The minister is the former head of the LDP’s web3 taskforce.

He has spoken on several occasions in the past about his belief that the current tax rules are not optimized for crypto firms.

And Taira recently hinted that Japan must reform its tax system to help crypto startups.

He has previously claimed that the existing system is “not optimized” for startups who operate “in the modern era.”

“When [Japanese] startup companies hold and issue tokens that are not as [well-known] as Bitcoin, accounting firms cannot conduct proper audits. This remains a problem.”

Masaaki Taira, Japan’s Digital Transformation Minister, speaking as the head of the LDP’s web3 task force at a conference earlier this year.

Japan Needs to Reassess Crypto Regulations, Critics Urge

Critics say Japan’s strict tax rules have led domestic startups in the crypto space to relocate overseas.

They say this is leading to a brain drain and capital outflows. Until recently, crypto-holding firms were required to pay taxes on “unrealized earnings.”

Today (October 3), the appointments of the State Ministers for the Ishiba Cabinet were confirmed at the Cabinet meeting. After the certification ceremony at the Imperial Palace, a commemorative photo was taken at the PM Office, (1/2) pic.twitter.com/Xeodic3s3j

— PM's Office of Japan (@JPN_PMO) October 3, 2024

This means that token-holding firms had to pay taxes on the coins they held if these tokens increased in value over the course of a financial year.

Most other nations tend to tax companies and citizens on their profits only after they sell their coins for fiat.

Additionally, Taira spoke about NFTs and their potential to transform the Japanese economy.

“NFTs like digital art are currently on the decline. But I think there are various ways of using blockchain and NFTs to maximize Japan’s potential value […].”

Taira

Gaming Hopes

There was further hope for the crypto gaming sector, although Taira was also guarded with his words. He concluded:

“Japan is very strong in the video gaming sector. And I understand that the gaming industry will soon be moving into the Web3 sector in earnest. When stablecoins start emerging, I think a new economic sphere will appear in the metaverse. In that sense, I think this represents an opportunity for Japan.”

Japan's incoming prime minister, Shigeru Ishiba, said he will call a general election for October 27 after his victory in a tight leadership race for the ruling Liberal Democratic Party. The vote will decide which party controls parliament's lower house https://t.co/syhLsk2THG

— Reuters (@Reuters) September 30, 2024

The FSA, meanwhile, has suggested that it is prepared to review not only the tax rules surrounding companies, but also those pertaining to individual crypto traders.

Japanese experts have bemoaned the rapid decline of the nation’s crypto industry in the wake of the Mt. Gox and Coincheck crypto exchange hacks.

Many say that the sector is over-regulated and needs urgent government assistance to grow.