In a significant development for cryptocurrencies, the Japanese government has approved the tax regime revision planned for 2024. Reports from Nikkei and CoinPost indicate that this revision aims to exempt companies from paying taxes on unrealized gains for cryptocurrencies if they choose. a long-term retention strategy. The Cabinet approved this revision on Friday, highlighting its application to companies holding cryptocurrencies issued by third parties.
Tax exemption for cryptocurrencies from Japan
Currently, cryptocurrencies issued by third parties held by companies are subject to tax based on the difference between market value and book value at the end of the financial year. However, the proposed revision aims to change this approach. If companies adopt a long-term holding strategy, mark-to-market will no longer apply, resulting in only profits from cryptocurrency sales being taxed.
This move could have significant implications for businesses involved in the cryptocurrency space. Daiki Moriyama, director of gaming blockchain maker Oasys, emphasized the importance of the Japanese government’s commitment to growing the Web3 business. “It is extremely important for all Web3 business stakeholders worldwide that the Japanese government has demonstrated its willingness to grow the Web3 business by enacting tax reform for the second year in a row,” he said.
Legislative process and global impact
While the cabinet’s approval is a crucial step, the proposed revision for fiscal year 2024 still needs to be submitted to the regular Diet session scheduled for January 2024. It then needs approval from both the Lower House and the Upper House, as stated in the report. The global crypto community will be following these developments closely, considering the potential impact on tax regulations for companies holding cryptocurrencies.
This move follows the Japanese tax authority’s announcement in June exempting crypto issuers from capital gains tax on unrealized gains. Prime Minister Fumio Kishida’s recognition of the transformative potential of Web3 and his determination to create a conducive environment for its promotion further underscores Japan’s evolving stance on cryptocurrencies.
Warning came from Chinese officials
Chinese authorities have issued a warning against illegal foreign exchange transactions facilitated through cryptocurrencies. This warning came after a major money laundering operation was revealed in 2022, and the cryptocurrency aspect of the incident attracted attention. According to reports, Shandong Provincial Police busted a $2 billion money laundering network spanning 17 provinces and municipalities, with cryptocurrency transactions playing a key role. The exposure of the money laundering network has led Chinese authorities to address the use of cryptocurrencies in illegal foreign exchange activities.
Xu Xiao, inspector of the Qingdao Branch of China’s State Administration of Foreign Exchange, emphasized that collecting yuan to buy cryptocurrencies through overseas exchanges and engaging in unregistered foreign exchange transactions is a crime. The illegal money laundering ring was successfully busted, leading to the seizure of cryptocurrencies in Tether (USDT), TEDA Coin and Litecoin (LTC) worth approximately $300,000. The case has now been referred to the prosecutor’s office for further investigation and prosecution, underscoring the Chinese government’s determination to combat illegal financial activities related to cryptocurrencies.
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