Japan Blockchain Association (Location: Minato-ku, Tokyo. Representative Director: Yuzo Kano. Hereafter referred to as JBA.) submitted a Tax Reform Request for Crypto Assets to the government on July 28th, 2023 .

Innovative services brought about by new technologies, like blockchain technology-
based crypto assets, NFT, and DeFi, have the potential to overthrow the principles
and ideas that conventional legal framework and various systems are based on. So,
we seek active discussion from industry, government, and academia, without being
tied down by existing frameworks, in examining environmental improvements for
the promoting web3, and we request that work begin first on crypto asset tax
reform, which we believe is of the utmost importance.

Request 1: the elimination of year-end tax on unrealized profits for
corporations holding crypto assets issued to third parties
Eliminate the year-end unrealized gains tax on crypto assets other than for those
held for short-term trading purposes by companies that have acquired crypto assets
issued by third parties, and replace the year-end market value tax on these assets
with a book value assessment. Eliminate the year-end unrealized gains tax on thirdparty-issued tokens, which is a factor in the current high barriers to entry for
domestic capital enterprises in the blockchain industry, to encourage new web3
industry participants and promote an environment where domestic companies can
operate web3 businesses.

Request 2: the introduction separate tax for tax returns and loss carry-forward deduction
The method of taxing profits on crypto asset transactions by individuals should be
changed from comprehensive tax to separate tax on declaration, at a flat rate of
20%. Furthermore, the taxpayer shall be allowed to carry the losses forward for
three years from the year following the year in which the losses are incurred and
deduct them from the amount of income related to crypto assets in the following
year and thereafter. The same approach should be applied to crypto asset derivative
transactions. Additionally, as it is difficult for crypto asset exchangers to obtain the
acquisition price of crypto assets for their customers who frequently transfer these
assets between overseas and domestic companies, we request that there be a
separate tax for declarations instead of separate withholding taxes.

Request 3: the elimination of tax for crypto asset exchanges
When individuals trade crypto assets, they are subject to income tax on the gains
generated every time a trade takes place. In the borderless web3 era, exchanging
crypto assets is likely to become mainstream in economics, and calculating the tax
involved becomes very complex due to the wide range of transactions that happen
and the types of crypto assets traded, which significantly hinders the convenience
factor inherent in crypto assets. Therefore, the tax on the trading crypto assets
should be eliminated.

JBA will continue its efforts to improve the environment for web3 promotion.