Japan remains cautious on cryptocurrency ETFs

On October 23, it was highlighted that Japan's regulatory approach is conservative and markedly different from that of the United States, Hong Kong, and other markets that have approved spot cryptocurrency ETFs. At the policy level, Japan remains hesitant to loosen restrictions, remove tax and regulatory barriers, and promote widespread adoption of cryptocurrencies. Although some Japanese companies are preparing to launch digital asset products, tax and regulatory restrictions remain major obstacles.

In Japan, general cryptocurrency investment income is considered miscellaneous income and subject to a maximum tax rate of 55%. However, ETFs are considered capital gains when traded on the securities market, resulting in a lower tax rate of about 20%. This provides a more attractive option for investors to achieve portfolio diversification through digital assets.

Spot cryptocurrency ETFs will also enjoy tax benefits such as loss carryovers. However, according to Keisuke Kimura, vice chairman of the Japan Cryptocurrency Business Association and former SMBC Nikko Securities financial advisor, many changes are still needed to persuade regulatory agencies to take action and introduce these potential tax benefits.