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In a historic move, Japan's National Tax Agency has approved a groundbreaking amendment granting tax exemptions for unrealized gains on cryptocurrencies. This significant announcement, made on June 20, signals a paradigm shift in the country's treatment of digital assets and offers financial relief to firms engaged in token issuance.
Several months ago, the Japanese government passed a mandate relieving cryptocurrency companies from paying taxes on notional profits derived from the tokens they create and retain. The decision, which was announced six months after its approval, followed extensive debates regarding its implications.
The discussions surrounding the amendment began in August of the previous year when legislators in Japan started examining the existing cryptocurrency tax regulations as part of a broader tax overhaul planned for 2023. With the recent changes, companies involved in token issuance are no longer subject to the standard 30% corporate tax on their assets, including unrealized profits. The ruling Liberal Democratic Party expects this tax relief to facilitate the operations of businesses engaged in token issuance.
In recent times, Japan's cryptocurrency industry has undergone significant transformations. The country strengthened its Anti-Money Laundering (AML) measures at the beginning of June to align its regulatory framework with international cryptocurrency standards. These revisions to the AML legislation were introduced in response to the Financial Action Task Force (FATF) deeming the existing regulations insufficient.
Within the past year, Japan has also implemented laws banning non-banking institutions from issuing stablecoins. The newly enacted regulation stipulates that the issuance of stablecoins should be restricted to licensed banks, registered money transfer agents, and trust companies.
As one of the early adopters of cryptocurrencies as private assets, Japan has implemented some of the most stringent crypto regulations globally. Notably, these regulations facilitated the swift return of assets to FTX users in Japan after the exchange's global outage, highlighting the contrast with countries that have less definitive laws and experienced prolonged delays.
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