Crypto startups in Japan will not be taxed for unrealized gains, according to the National Tax Agency.

Without a doubt, the cryptocurrency and blockchain markets have proven to be a major support for economic growth in many markets around the world. It is now safe to say that countries understand that the cryptocurrency and blockchain industries are here to stay and it is wise to harness their power to rebuild their economies after the devastations of Covid-19. Japan has been a major growth factor for most crypto projects, especially those fleeing the United States due to punitive regulatory measures. Crypto projects like Ripple have made significant inroads into the Japanese market through their cross-border payment solutions, including RippleNet.

Japan Regulators Open Doors Wide for Crypto Projects

Following the meteoric growth of the cryptocurrency market through the Decentralized Financial (DeFi) industry, the Japanese government is keen to attract investors to tap into its vast local market. In the recent update on cryptocurrency in Japan, the National Tax Agency, through the ruling Liberal Democratic Party (LDP) tax committee, approved a proposal to exempt digital asset projects from paying unrealized gains on their products.

Essentially, crypto projects operating in the Japanese market were required to pay unrealized taxes of about 35% on digital tokens issued to the local market. The document added that the tax exemptions will be applicable to unrealized gains from holding applicable crypto assets continuously from the date of issuance or from taking certain technical measures to prevent its transfer to other persons.

The Japanese government only wants to tax crypto traders after they take profit in fiat currencies, which will be done through regulated digital asset exchanges. According to the country’s Prime Minister, Fumio Kishida, the crypto market has the potential to change the financial market for the better in the future. This is evidenced by the fact that Kishida reassured investors in a parliamentary speech last year that the country will continue to focus on supporting the social implementation of digital technology.

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Earlier last year, the current ruling party in Japan, the Liberal Democratic Party (LDP), released an NFT White Paper that referred to the Web3 industry as the new frontier of the digital economy and outlined plans to advance the national strategy on mainstream adoption.

Market Outlook

The crypto market in Japan has significantly rebounded since the collapse of FTX and the local subsidiary returned cash to traders. As a means to attract investors of all kinds, Japan has initiatives to use NFTs and DAOs in various governance aspects. Furthermore, government officials in Japan are closely looking into how the metaverse industry could revolutionize overall governance.

Additionally, government officials can meet virtually on a secure platform through blockchain technology, thus increasing overall efficiency.