Japan's FSA Plans Major Review of Crypto Laws Amid Political Changes and Potential Tax Cuts

The Financial Services Agency (FSA) in Japan is gearing up for a big review of the country’s cryptocurrency laws. They might loosen some regulations and even think about lowering capital gains taxes. But, there are some recent election developments that could change things up.

According to a Bloomberg report from September 30, the FSA plans to focus on the current Payment Services Act. They want to figure out if cryptocurrencies should be treated as payment options or as investment tools. An unnamed official mentioned that most people in Japan use crypto for investments. If that’s true, it could shift the entire legal framework.

This year, the Japanese crypto market has been bouncing back. There are specific measures that could help boost this recovery. One of the most appealing changes could be a reduction in the capital gains tax on crypto, from as high as 55% down to 20%, similar to stock taxes. The FSA is also looking into ways to enhance consumer protection. Business leaders are calling for more relaxed regulations.

The input from business leaders could be crucial for the FSA's decisions. Major companies, like Japan's largest bank, have been working on a stablecoin since 2023. Plus, Sony made headlines this year by acquiring a cryptocurrency exchange. If these big firms support relaxed regulations, the FSA might be more inclined to listen.

A key complication for the FSA's review is the upcoming election in Japan. Prime Minister Fumio Kishida isn’t running for re-election, and his constituency has chosen Shigeru Ishiba as his successor. Ishiba has said he supports continuing existing economic policies, but his selection comes after notable disagreements within the Liberal Democratic Party (LDP).

Arthur Hayes, a prominent crypto entrepreneur, said, “If crypto had a vote, we would want Takaichi. She wants to continue ‘Abenomics,’ which means more money printing and tolerating a weak yen.”

As one of his first actions, Ishiba has called for a snap election. As the President of the LDP and the likely new Prime Minister, he plans to dissolve the lower house of Parliament and hold elections on October 27. Kishida has been a strong ally of the Web3 movement, but Ishiba hasn’t made many public statements about his own stance on crypto.

Bloomberg quoted an FSA official who said there’s no clear timeline for the review. It’s expected to last through the winter, which means it will still be ongoing when the election takes place. Since Ishiba became the new party leader, Japanese stock markets have already shown signs of instability.

While there are big opportunities from this FSA review, a positive future for crypto isn’t guaranteed. If Ishiba decides to abandon or change his predecessor’s pro-crypto policies, some chances for favorable regulations may slip away. For now, the FSA's study is just beginning, so it’s too early to make any solid predictions.