The Japanese cabinet approved a proposal by the ruling Liberal Democratic party to end taxation of unrealized cryptocurrency gains in a move that is likely to boost the development of the country’s Web3 industry, CoinDesk Japan reported.

The proposal, which needs to be debated in the Diet, Japan’s parliament, will end corporate taxation on the difference between the market and book values of crypto assets issued by other companies. It it became law, the Dec. 22 approval would end a discrepancy in the treatment of third-party issued assets and those issued by holders, who are not taxed on mark-to-market values. The tax has hindered Web3 businesses in the country, CoinDesk Japan said.

Prime Minister Fumio Kishida’s government has been considering submissions from industry associations such as the Japan Crypto Asset Business Association (JCBA) and Japan Blockchain Association on how best to encourage the industry's development, which it sees as a pillar of economic reform. Having politicians drive policy development is a departure from traditional practice in a country where that role is usually taken by the bureaucracy.

Web3 companies have been moving overseas because they became liable for tax even before making profits from their activities, Gaku Saito, chairman of the JCBA's tax review committee, told CoinDesk Japan in an interview. Companies were having to pay tax on unrealized gains, forcing them to sell their assets and stifling business development.

Japan taxation Policy Regulation Web3

Sheldon Reback

Sheldon Reback is CoinDesk's European news editor. Before joining the company, he spent 26 years as an editor at Bloomberg News, where he worked on beats as diverse as stock markets and the retail industry as well as covering the dot-com bubble of 2000-2002. He subsequently managed the Bloomberg Terminal's main news page before becoming the European editor for a global project to produce short, chart-based stories across the newsroom. His previous work as a journalist took him to Hong Kong, where he reported and edited for several technology magazines, and he also has experience in market research and writing computer manuals. Sheldon has an MBA from the London Business School and an industrial chemistry degree from Brunel University. He owns a small amount of ether.