A recent survey reveals that Japanese investors are withdrawing from the cryptocurrency markets not due to price fluctuations but because of complex tax requirements.
The Japanese financial planning platform 400F asked 894 participants nationwide in November about their cryptocurrency habits. Of former cryptocurrency owners, 22.2% cited difficulties with the tax system as the primary reason for their withdrawal. This surpassed price volatility, as 19.4% of former investors named volatility as the main reason for exiting the cryptocurrency markets.
Administrative requirements overshadow market fluctuations
Current digital asset owners report that both volatility (61.4%) and the complexity of taxes (60%) are nearly equal challenges. In Japan, cryptocurrency gains are classified as 'other income' and can be taxed up to 55% after local taxes. Investors must track each trade, calculate gains or losses in yen, and report them annually. For many, this administrative challenge outweighs the benefits, although 62.7% report that long-term wealth accumulation is the primary reason for investing, compared to 15.1% who emphasize short-term speculation.
Investors using NISA and iDeCo accounts, two popular tax-advantaged accounts for stocks and retirement savings, are particularly affected by the complex reporting requirements of cryptocurrencies. Their experience with the straightforwardness of traditional investment accounts makes the paperwork for digital assets even more burdensome.
Growing demands for regulatory changes
Most respondents (70.6%) describe their willingness to take risks as neutral, aiming to balance risk and return. However, about 40% of these 'neutral' investors say they would take on more crypto risk if Japan's regulators clarified their approach to digital assets and taxes.
This demand for more precise regulation comes as reports circulate that Japan's Financial Services Agency (FSA) intends to reclassify cryptocurrencies as ordinary financial products and reduce the highest tax rate to 20%. Such changes could significantly ease the tax burden currently cited as reasons for leaving the cryptocurrency markets.
Where Japanese investors seek information
According to the survey, respondents rely almost equally on specialized media or official media (63%) and social or influencer platforms (58.9%) for crypto information.
In summary, the results indicate that Japanese investors' commitment to cryptocurrencies depends more on government regulation and administrative procedures than on price fluctuations. Simplified tax rules could open up greater crypto growth in Japan's significant economy.