Crypto analyst Willy Woo said Japan’s plan to classify Bitcoin as a financial product could significantly increase demand in the country.
According to Woo, this regulation will simplify the tax regime for individual investors, making Bitcoin purchases more attractive.
According to Woo’s assessment, as Bitcoin is classified as a financial product, the tax rate on Bitcoin income and transactions will drop to 20%. Currently in Japan, crypto earnings are subject to a marginal income tax ranging from 43% to 55% for individuals with annual income above approximately $57,000. The new regulation aims to reduce the tax burden on investors by removing these high rates.
The analyst stressed that this change will also have implications on the institutional side. According to Woo, Metaplanet, a Japan-based Bitcoin treasury company, will lose its current tax arbitrage advantage. Indeed, Bitcoins held by individual investors in their portfolios will also be subject to a smaller and clearer tax regime.
The planned regulation is not limited to Bitcoin alone. Around 110 different crypto assets are also expected to be classified as financial products within the same scope. However, Woo added that staking revenue would be an exception and would continue to be taxed via the marginal income tax.
On the other hand, this tax advantage should not come into force immediately. In Japan, a legislative change treating crypto assets more closely as financial products must first be passed by Parliament. According to current forecasts, the 20% tax is expected to come into force from 2028.
*This does not constitute investment advice.