[NEWS] LDP Policy Research Council Approves "Urgent Proposal to Make Crypto Assets an Asset that Contributes to the National Economy"

On the 19th, Akihisa Shiozaki, a member of the House of Representatives and head of the LDP's Digital Society Promotion Headquarters web3, announced that the LDP Policy Research Council had officially approved the "urgent proposal to make crypto assets an asset that contributes to the national economy."

The urgent proposal includes making profits and losses from crypto asset (virtual currency) trading subject to separate taxation, reviewing the regulatory framework, and strengthening cybersecurity to make crypto assets an asset that contributes to the national economy.

The LDP has been working to solve the issues currently facing the Web 3.0 industry in Japan, mainly through its web3PT (now web3WG: Working Group), including publishing the "web3 White Paper 2024 - Towards an era when new technologies become the social infrastructure."

In light of the situation in which the number of cryptocurrency trading accounts exceeded 11 million as of October this year and user deposits reached 2.9 trillion yen, the proposal states that "it appears that many citizens are trading cryptocurrency as an investment target, even compared to the situation at the time when FX trading was subject to the old Financial Futures Trading Act in 2005 (integrated into the Financial Instruments and Exchange Act in 2007) (approximately 800,000 accounts in 2007)."

The proposal also states that "in order to further promote this trend and make cryptocurrency an asset that contributes to the national economy," it is necessary to promote the following three measures.

• Making profits and losses from cryptocurrency trading subject to separate reporting taxation
• Regulatory framework for cryptocurrency
• Cybersecurity efforts to make cryptocurrency an asset that contributes to the national economy

First, regarding the tax system, currently, profits generated from cryptocurrency trading are treated as miscellaneous income, and are taxed at a maximum of 55% when combined with income tax and resident tax. Considering that the tax rate is stricter than in other countries, it is necessary to consider making crypto assets subject to a 20% self-assessment separate taxation, allowing loss carryover deductions for three years, and making crypto asset derivative transactions subject to self-assessment separate taxation.

Regarding the regulatory framework, he described crypto assets as "essentially an essential element for the functioning of blockchain," and pointed out that their use is expanding not only in financial transactions but also in DAO governance and as a payment method for online games. He explained that non-financial businesses such as telecommunications carriers, game companies, and art and animation companies are expanding their business in the Web 3.0 field.

Furthermore, he mentioned that crypto assets are not positioned as financial products as an investment target, and expressed his opinion that "while paying attention to protecting users, it is possible to legally position some crypto assets as financial products and make them subject to regulation under the Financial Instruments and Exchange Act."

He stated that while respecting diverse opinions, consideration should be given to what the optimal regulatory framework should be, and emphasized that consideration should also be given to making crypto assets the target of ETFs.

Finally, he touched on strengthening cybersecurity in order to make crypto assets an asset that contributes to the national economy. From the perspective of protecting user assets, cryptocurrency exchanges are required to ensure strong cybersecurity, but the nature of cryptocurrency circulates across borders, and the proposal states that there are limits to what operators can do to ensure and strengthen security on their own. Therefore, it emphasizes the need for a framework for cooperation between operators and internationally, and suggests that each operator should further improve their security level and that the government should cooperate and support such efforts.

Reference: Mr. Shiozaki X , Urgent Proposal Materials
Image: Shutterstock

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