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Unlocking the Potential of Web3: Japan’s Move to Eliminate Tax on Unrealized Crypto Asset Profits


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 has been a leader in embracing and regulating the world of cryptocurrency. From recognizing it as a legal form of payment in 2017 to approving the first-ever cryptocurrency exchange-traded fund in 2021, Japan has been at the forefront of the digital currency revolution. And now, the country is once again making headlines by taking a bold step towards unlocking the potential of Web3 – the next generation of the internet.

In a recent move, Japan’s ruling party has proposed eliminating the tax on unrealized profits on crypto assets. This has caused a stir in the cryptocurrency community and has been met with mixed reactions. While some view it as a game-changing decision, others are skeptical of its consequences. In this article, we’ll delve into the details of this new proposal and explore its potential impact on the world of Web3.

Understanding Tax on Unrealized Crypto Asset Profits and Its Current Status in Japan

Before we dive into the latest development, let’s first understand what unrealized profits and taxes on cryptocurrency actually mean. Unrealized profits refer to the gains on an investment that have not been sold or realized yet. In other words, it is the increase in the value of an asset that has not been converted into cash.

In Japan, cryptocurrency is considered a taxable asset, and any gains made from it are subject to capital gains tax. This means that if you bought Bitcoin for $10,000 and it increased in value to $20,000, you would have to pay tax on the $10,000 gain. The tax rates in Japan can range from 15% to as high as 55%, depending on the amount of gains and the individual’s income bracket.

The new proposal seeks to eliminate this tax on unrealized profits, which would essentially mean that individuals will only pay tax on their crypto gains when they are converted into fiat currency or used for purchases.

Implications of Eliminating Tax on Unrealized Crypto Profits

The move to eliminate tax on unrealized profits on cryptocurrency has sparked excitement among crypto enthusiasts, but it has also raised some concerns. Let’s take a closer look at the potential impact of this proposal.

1. Encouraging Investment and Innovation in Web3

Eliminating the tax on unrealized crypto profits will make it more attractive for individuals and businesses to invest in cryptocurrency. This, in turn, could lead to more innovation and growth in the Web3 space. With a reduced tax burden, individuals and businesses may be more willing to take risks and explore new opportunities in the digital currency world.

2. Boosting Japan’s Position in the Global Crypto Market

Japan has been a pioneer in embracing and regulating cryptocurrency, and this new proposal could further enhance its position in the global market. By providing a favorable tax environment for crypto investors, Japan can attract more international investments and solidify its position as a leading player in the crypto space.

3. Potential Loss of Tax Revenue for the Government

On the flip side, the elimination of tax on unrealized crypto profits could lead to a significant loss of tax revenue for the Japanese government. As more individuals and businesses invest in cryptocurrency, the government may see a decrease in tax payments, which could affect their budget and spending plans.

4. Risks of Market Manipulation and Tax Evasion

Critics of the proposal argue that it could potentially lead to market manipulation and tax evasion. With no tax on unrealized gains, individuals may be tempted to artificially inflate the value of their assets to avoid paying taxes. This could have serious repercussions on the market and its stability.

5. Uncertainty for Taxpayers and Crypto Investors

The proposed elimination of tax on unrealized profits on cryptocurrency has yet to be officially approved and put into law. This has caused some uncertainty for taxpayers and crypto investors, who are unsure of how to proceed with their current investments. The lack of clarity and guidance from the government could be a cause for concern and might also hinder the growth and adoption of cryptocurrency in the country.

Practical Tips and Considerations for Crypto Investors in Japan

If and when the proposal to eliminate tax on unrealized crypto profits is approved, it is essential for crypto investors in Japan to keep the following tips and considerations in mind:

1. Keep Records of All Crypto Transactions

Maintaining accurate and detailed records of all crypto transactions is imperative for tax reporting. This will help taxpayers calculate their gains and losses accurately and ensure compliance with any future regulations.

2. Seek Professional Tax Advice

With the evolving landscape of cryptocurrency and tax regulations, seeking advice from a tax professional would be prudent. They can guide individuals on the tax implications of their crypto investments and help them navigate the potential changes in tax laws.

3. Diversify Crypto Investments

While the potential elimination of tax on unrealized profits may be enticing, it’s always wise to diversify investments. This will help mitigate risks and protect against any potential market fluctuations.


The proposal to eliminate tax on unrealized profits on cryptocurrency is a significant move for Japan and has the potential to unlock the true potential of Web3. While it has sparked excitement and anticipation in the crypto community, it is essential to consider its potential implications and uncertainties. Nevertheless, this step by Japan’s government showcases their progressive attitude towards cryptocurrencies and their willingness to embrace the future of finance. As the proposal makes its way through the legislative process, only time will tell the true impact of this decision on the world of Web3.

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