Japanese cryptocurrency traders who have been lackadaisical about paying their taxes are in for a rude shock next year. The country’s government is currently putting finishing touches to a plan that would ensure these persons pay their tax on profits from cryptocurrency trading.

New System to Identify Tax-Evading Traders

Reports from Japanese news outlets indicate that the government is designing a system to apprehend traders refusing to pay required taxes on profits made from cryptocurrency trading.

Sources close to the matter say the system would give power to the National Tax Agency (NTA) of Japan to “request the cryptocurrency transaction information of individuals” suspected of evading tax.

Tax Laws on Crypto Profits in Japan

Currently, Japan’s Income Tax Act covers any profits gained from cryptocurrency trading. Thus, individuals earning above 200,000 yen ($1,700) annually must pay tax on these profits.

Mandatory Customer Information Disclosure

The source added that cryptocurrency businesses in Japan could previously choose whether to share customer data. But with the new system, all businesses would be mandated by law to submit customer information.

Names, personal identification numbers, and addresses will be included. While this may impact the anonymity traditionally linked with cryptocurrency, it will not affect everyone.

Focus on High-Value Traders First

The NTA will begin by focusing on big-time traders—those suspected of earning over 10 million yen ($88,000) from cryptocurrency trading. Small-time traders remain safe for now.

Implementation Timeline

Reports say the new tax system will roll out in Japan’s next fiscal year, from April 1 to March 31.

Broader Regulatory Efforts in Japan

This crackdown is not Japan’s first. Earlier this year, the Financial Services Authority (FSA) granted self-regulatory status to the crypto industry, allowing the Japan Virtual Currency Exchange Association (JVCEA) to monitor exchanges for violations.

Recently, the FSA considered introducing a regulatory framework for initial coin offerings (ICOs) to protect investors from fraud.

Conclusion

Japanese authorities are finalizing plans to target large cryptocurrency traders who evade taxes. Those earning over 10 million yen will have to submit transaction info to the tax agency.