A national survey revealed that 22.2% of Japanese investors left the cryptocurrency market due to tax complexity, surpassing the 19.4% who left due to price volatility. Current holders consider volatility (61.4%) and tax obligations (60%) nearly equal concerns, while 62.7% of them focus on building long-term wealth. About 40% of "neutral" investors would take on more risks in cryptocurrencies if the regulatory framework were clearer, with reports of imminent tax reforms.
Administrative demands overshadow market volatility
A recent survey revealed that Japanese investors are moving away from the cryptocurrency market, not due to price volatility, but because of complex tax requirements.
The Japanese financial planning platform 400F conducted a nationwide survey of 894 participants in November regarding their habits in dealing with cryptocurrencies. Among those who had previously owned cryptocurrencies, 22.2% cited difficulties related to the tax system as their primary reason for leaving. This percentage exceeded that of price volatility, with only 19.4% of former investors stating that volatility was their main reason for exiting the cryptocurrency space.
Current challenges:
* Current digital asset holders indicate that both volatility (61.4%) and tax complexity (60%) represent nearly equal challenges.
* In Japan, cryptocurrency profits are classified as "miscellaneous income" and can be taxed at rates of up to 55% after local taxes.
* Investors must track every trade, calculate profits or losses in Japanese yen, and report them annually.
For many, this administrative challenge outweighs the benefits, although 62.7% stated that the main goal of investing is to build long-term wealth, compared to 15.1% who prioritize short-term speculation.
It is particularly affected by the complex requirements for reporting cryptocurrency for investors who use NISA and iDeCo accounts, which are two popular accounts with tax advantages for stocks and retirement. Their experience with traditional investment accounts makes the required paperwork for digital assets seem more burdensome.
Increasing calls for regulatory changes
The majority of survey participants (70.6%) describe their risk appetite as "neutral," aiming to balance risk and return. However, about 40% of these "neutral" investors say they would increase their risk in cryptocurrencies if Japanese regulators clarified their approach to digital assets and taxes.
This demand for more precise regulation comes at a time when reports are circulating that Japan's Financial Services Agency (FSA) plans to reclassify cryptocurrencies as standard financial products and reduce the maximum tax rate to 20%. Such changes would significantly ease the tax burdens that are currently driving exits from the cryptocurrency market.
Information sources for Japanese investors
The survey found that participants rely almost equally on:
* Specialized or official media (63%).
* Social media platforms or influencers (58.9%) for information about cryptocurrencies.
General conclusion:
Overall results indicate that Japanese investor participation in cryptocurrencies is more dependent on government regulations and administrative procedures than on price volatility. Simplified tax rules are likely to open the door for greater growth of cryptocurrencies in the large Japanese economy.
