Japan's official recently released a 2026 tax reform plan, delivering a heavy blow to the crypto market. The latest policy directly reduces the capital gains tax rate on crypto assets from the current maximum of 55% to 20%, aligning it with stocks and funds.

What does this mean? Currently, Japanese traders pay up to 55% tax on crypto trading profits, which almost no one can accept. Once it drops to 20%, the tax burden will significantly decrease, likely activating a large amount of dormant trading demand. Many traders and institutions who were previously scared away now have a reason to reconsider entering the market.

The core of the reform is clear: profits from crypto assets will be benchmarked against traditional financial assets and taxed uniformly at 20%. This rule will apply to specific crypto assets handled by compliant institutions. While BTC and ETH are most likely to be included, the official detailed regulations have not been fully announced yet, and further policy clarifications are awaited.

From a market perspective, this reform has two obvious benefits. First, the substantial reduction in tax burden will significantly boost trading activity. Second, the willingness of institutions and long-term funds to enter will increase, as the compliance costs are set, and a tax-friendly environment is very attractive to institutional investors.

But don’t overlook potential risks. After the new policy is implemented, there may be a tilt toward leading assets because compliance requirements have increased. Smaller coins might be marginalized, and assets without clear ecological advantages will find it hard to gain institutional recognition.

In the long term, Japan aims to reintegrate cryptocurrencies into the mainstream financial system. In the short term, capital will indeed flow into core assets like BTC and ETH, but the overall ecosystem will become healthier. If other major Asian economies follow suit with similar policies, the next wave of incremental capital into crypto assets could really be on the horizon. The key to this reform is whether countries can collectively lower policy thresholds.