Survey Shows Main Reason Japanese Investors Exit Crypto Market Is Not Price Volatility, but Complicated Tax Requirements

The latest survey shows that the main reason Japanese investors are exiting the cryptocurrency market is not market volatility, but rather the complex and burdensome tax system. According to a survey conducted by financial platform 400F in November among 894 investors, 22.2% of respondents who previously held but have since exited crypto assets cited “tax complexity” as their reason for leaving, a higher proportion than the 19.4% who considered “price volatility” to be the main factor.

For investors still in the market, price volatility and tax challenges are almost equally important. 61.4% of current holders view price fluctuations as the main challenge, while 60% say tax filing is a key obstacle. In Japan, cryptocurrency earnings are classified as “miscellaneous income” and can be taxed at rates as high as 55%. Investors are also required to accurately record every transaction and convert it into yen, deterring many ordinary investors.

The complicated administrative process stands in stark contrast to traditional investment methods. Many investors using tax-advantaged accounts such as NISA or iDeCo are accustomed to the simpler tax management of stock assets, so they are more likely to feel frustrated when faced with the cumbersome reporting process for cryptocurrencies. Nevertheless, as many as 62.7% of respondents indicated that their main purpose for investing in digital assets is long-term wealth accumulation rather than short-term speculation.

It is noteworthy that the overall risk appetite of investors tends to be neutral (70.6%). However, about 40% of neutral investors said they would be willing to increase their crypto holdings if the tax system were clearer and the regulatory environment more favorable. This suggests that the growth bottleneck in Japan’s crypto market lies more in the system than in the assets themselves.

Recent reports indicate that Japan’s Financial Services Agency (FSA) is considering tax reforms to reclassify cryptocurrencies as standard financial products and reduce the maximum tax rate to 20%. If implemented, this would significantly ease the burden on investors and could become an important catalyst for the expansion of the cryptocurrency market.

The survey also shows that the main sources of crypto information for Japanese investors are official and professional media (63%), followed by social media and KOLs (58.9%). Overall, Japanese investors’ participation in the crypto market is clearly influenced by policy direction, and simplifying the tax system may become the key to promoting the adoption of digital assets. (BeinCrypto)