The principal financial regulator of Japan, the Financial Services Agency (FSA), has decided to take crypto regulation into its own hands and has proposed to change the tax code in regard to digital assets. 

The request was submitted by the FSA on Aug. 31. The most notable suggestion in the 16-page document is a bid to free domestic firms from the end-of-the-year “unrealized gains” tax on crypto. In some national legislations, the legal entities have to pay taxes only after the crypto assets are sold to fiat, but in Japan, they are being taxed on a regular yearly basis.

The amendment, proposed by the FSA, has the potential to be effected, as the Agency states that the Ministry of Economy, Trade, and Industry has already supported its initiative. 

As the FSA explains in its release, the reform will “improve the environment for the promotion of Web3 and promote business startups that make use of blockchain technology.”

Related: EOS secures regulatory approval in Japan, will trade against yen

Advocates of the crypto industry in Japan have been demanding a revision of the national tax regime for digital assets for some time. At the end of July, the Japan Blockchain Association (JBA), a non-government group, asked the government of Japan to make three major changes in regard to crypto regulation.

The elimination of the year-end unrealized gains tax on corporations holding crypto assets was the first one. The other two include switching from personal crypto asset trading profits taxation to self-assessment separate taxation, with a uniform tax rate of 20%, and the elimination of income tax on the profits generated each time an individual exchanges crypto assets.

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