The minister argues that the proposed tax levels will not encourage investment into cryptocurrencies
Japanese Finance Minister, Taro Aso, stated that he might not be willing to back legislation that will allow Japan to treat cryptocurrency income within the same tax parameters as income from stocks. The proposed legislation would lead to a tax rate on cryptocurrency-based incomes to reduce to a flat 20%. The finance minister insisted that the country was not ready for the move as it might not be viable for households to invest in digital assets.
Aso expressed his unwillingness to push for legislation to lower the tax rate, in response to a question from Japan Restoration Association member, Shun Otokita, at a meeting of the House of Councillors Committee on Financial Affairs on June 2. He explained that an economy like Japan’s, where most investments and assets are in the form of cash was not ready for legislation that promotes digital assets.
He said that “Out of 1,900 trillion yen [$17.6 billion USD] financial assets held by households in Japan, around 900 trillion yen [8.4 billion USD] is now being held as cash deposits and that is abnormal.” He went on to add that it would be difficult to get investors in Japan to invest in cryptocurrency, and thus the tax rate need not be adjusted.
Presently, nearly all cryptocurrency income in Japan including trading, mining, lending etc, is classified as ‘miscellaneous income’ and can be taxed up to 55%. Therefore, cryptocurrency proponents in the country were pushing for legislation to bring that number down to 20%. However, based on the finance minister’s views, it seems as if they will have to wait a bit longer.
In recent legislation brought out on May 1, Japan ruled to replace all references to “virtual currency” with “crypto assets.” The Payment Services Act (PSA) also ruled to lowered the leverage cap for cryptocurrency margin trading from the original 4X to 2X.
In the same committee on Tuesday, Japan’s financial watchdog, the Financial Services Agency (FSA), was asked if the decision to cut the leverage cap without taking the time to discuss with experts was appropriate. The agency claimed that the matter was discussed with crypto experts, FX insiders as well as considering public opinion. It added that the decision was appropriate considering the volatility of the digital currency, as seen in the fallouts this March.
Speaking about the volatility of cryptocurrency, the finance minister jokingly said “The word ‘crypto’ sounds a bit shady so why don’t we use the Japanese word for stable coin? […] Sounds more stable right?”