Cryptocurrency lobbying groups in Japan reportedly intend to ask lawmakers to reduce the tax rates on the local digital asset sector. Thus, talents in the industry will be more likely to stay in their home country instead of trying their luck in a nation where taxation policies are less stringent.
The Crypto Brain Drain Should Stop
According to a recent coverage by Bloomberg, two of the nation’s leading crypto lobbying groups – the Japan Cryptoasset Business Association and the Japan Virtual and Crypto assets Exchange Association – plan to submit a proposal to the Financial Services Agency. The move will aim to establish a better environment for domestic digital asset businesses by easing the tax rules.
If greenlighted, local companies will no longer have to pay taxes on paper gains on cryptocurrency holdings if they own them for purposes other than short-term trades. Such earnings are currently slammed with a 30% annual taxation rate.
Those unfriendly conditions have caused many local companies to settle in other countries where authorities are more open to the digital asset realm, including Singapore.
“Japan is an impossible place to do business. The global battle for a Web3 hegemony is underway, and yet, Japan isn’t even at the start line,” said Sota Watanabe – Chief Executive Officer of Stake Technologies.
The lobbying group’s idea might change that trend and keep most Japanese crypto talents on local soil. It will also test Prime Minister Fumio Kishida’s intentions to embrace the sector.
Earlier this summer, the government approved a policy that should develop the Web3 space in the country, including the use of digital assets, non-fungible tokens (NFTs), and decentralized autonomous organizations (DAOs).
The proposal is expected to reach the monetary watchdogs as early as this week. It is worth noting, though, that Japan’s government usually discusses tax amendments at the beginning of the summer and makes final decisions by the end of the year, meaning that the lobby groups will have to wait for several months to see if their idea will become live.
India With a Similar Problem
Another country that seems to be losing some of its crypto talents due to controversial government rules is India. Earlier this year, Sandeep Nailwal – CEO and Co-Founder of Polygon – said the brain drain in his home nation is “absolutely crazy” because of the regulatory chaos that reigns there.
India’s ruling body and its financial watchdogs have been contemplating for years what rules to impose on the local crypto sector, ranging from a total ban to the implementation of taxation policies. Upon finally adding a 30% tax on most crypto operations, though, many local industry participants started to complain, the trading volumes declined, and people started fleeing the country.
Nailwal admitted that this uncertainty had affected him, too. He outlined his wish to live in India and keep developing his blockchain protocol there. Nonetheless, current conditions are not in favor of that desire:
“Overall, the way the regulatory uncertainty is there and how big Polygon has become, it doesn’t make sense for us or for any team to expose their protocols to local risks.”