Companies operating in Japan may soon enjoy relief from taxes on unrealized cryptocurrency gains, as the country’s ruling coalition explores a proposal to exempt digital assets held by corporations. This move aims to retain startups and businesses, preventing them from opting for tax-friendly locations like Singapore and Dubai over Tokyo.

Under the proposed tax law change, cryptocurrencies held for purposes other than short-term trading would be excluded from corporate taxes, based on their market value at the end of each fiscal year.

The exemption, discussed recently by policymakers in the Liberal Democratic Party and its coalition partner Komeito, is expected to be incorporated into the fiscal 2024 tax reform plan, set to be finalized later this month.

Japan currently stands out as one of the few countries taxing companies based on the market value of their cryptocurrency assets, excluding self-issued coins. Observers in the industry suggest that this unique taxation approach has been pushing companies with cryptocurrency involvement, such as venture capital firms and non-fungible token businesses, to seek more favorable tax environments in jurisdictions like Singapore, Dubai, and Switzerland.

By considering this tax reform, Japan aims to create a more competitive landscape and discourage businesses from relocating, ultimately fostering a thriving crypto ecosystem within the country.