Ethereum (and other cryptocurrencies)

[TokyoWart]

A while back I discovered Grayscale Bitcoin trust as a relatively easy vehicle for investing in crypto. The bitcoin ticket is gtbc. Looks like they have a ticker for Ethereum as well. Not for the faint of heart but could be a worthwhile hedge to consider. Worth noting that their fees are high (2%).

I haven't taken the leap into Bitcoin but I've been following the story because it's been an interesting issue before the US SEC. The Grayscale Bitcoin trust has an additional disadvantage besides the 2% management fee. It doesn't really match the price of Bitcoin. Although the difference varies with market interest in Bitcoin, GBTC typically trades at a roughly 20% premium to the price of Bitcoin so it's like buying a stock fund at a 20% premium to asset value. I'm not sure if it's possible in Japan yet but in the US I think owning Bitcoin in your Paypal account gives you a closer match to the actual asset price. One of the arguments being made to the SEC that it should approve a Bitcoin ETF is that GBTC is a very poor instrument for retail investors. This is all theoretical for me (never owned Bitcoin and still don't know what it will do) but the saga of the SEC's very slow review of Bitcoin ETF's is an interesting story to me so I'm following it.

[adamu]

I'm not sure if it's possible in Japan yet but in the US I think owning Bitcoin in your Paypal account gives you a closer match to the actual asset price.

In Japan https://bitflyer.com/en-jp/ is probably the best way to buy cryptocurrencies (although I've not used them for a couple of years). If you're serious about it, buying something like a Trezor https://trezor.io/ to store them in and treating it like precious metals makes sense. Keep in mind that transaction fees are expensive, so you might not be happy about the fee to transfer out of the exchange. However, hardware wallet + transaction costs will save you losing huge amounts to the middlemen and even more speculation involved in the crypto funds.

[Viralriver]

I wonder, what are the tax implications once you make your first 100 JPY investment into crypto, through something like this? I know the standard 特定 account on Rakuten doesn't even cover FX trading; I presume for similar reasons to this. Would this then require filing a 確定申告 at the end of the year?

[Ax6isB]

I haven't taken the leap into Bitcoin but I've been following the story because it's been an interesting issue before the US SEC. The Grayscale Bitcoin trust has an additional disadvantage besides the 2% management fee. It doesn't really match the price of Bitcoin. Although the difference varies with market interest in Bitcoin, GBTC typically trades at a roughly 20% premium to the price of Bitcoin so it's like buying a stock fund at a 20% premium to asset value. I'm not sure if it's possible in Japan yet but in the US I think owning Bitcoin in your Paypal account gives you a closer match to the actual asset price. One of the arguments being made to the SEC that it should approve a Bitcoin ETF is that GBTC is a very poor instrument for retail investors. This is all theoretical for me (never owned Bitcoin and still don't know what it will do) but the saga of the SEC's very slow review of Bitcoin ETF's is an interesting story to me so I'm following it.

You bring up an interesting aspect of this. Do you want to own digital currency or just trade it? Or both? Or just watch it

[adamu]

edit: inaccurate post. Sorry See Chris' correction.

Would this then require filing a 確定申告 at the end of the year?

Yes. If you sell crypto or convert one form of it to another, that's a taxable event and you are supposed to declare it.

However, I believe there is a 380,000 yen allowance. So you only have to declare if you made more than 380k. But don't quote me on that - I just did a quick search.

This article looks helpful (Japanese): https://advisors-freee.jp/article/categ ... l-01/9456/

[Chris]

Would this then require filing a 確定申告 at the end of the year?

Yes. If you sell crypto or convert one form of it to another, that's a taxable event and you are supposed to declare it.

However, I believe there is a 380,000 yen allowance. So you only have to declare if you made more than 380k. But don't quote me on that - I just did a quick search.

This article looks helpful (Japanese): https://advisors-freee.jp/article/categ ... l-01/9456/

I think the 380,000 JPY is your annual income tax free allowance that every resident is entitled to. The site you linked also mentioned 330,000 JPY resident tax free allowance too. The website also seems outdated because the income tax free allowance increased to 480,000 JPY and the Resident tax free allowance increased to 430,000 JPY in 2020.

If you're working and earning a living, chances are you earn over 480,000 JPY (and 430,000 JPY) per tax year. So like FX gains you still have to declare all crypto currency gains as miscellaneous income.

The website mentions

"③専業主婦や学生など
仮想通貨による利益（所得）と他の所得が38万円を超えた場合
38万円を超えると所得税を払わなければならないだけでなく、扶養の配偶者控除からも外れることになります。なお、所得税は38万円以上で申告が必要ですが住民税は33万円以上で申告が必要になります。"

That is kind of referring to people they expect to not have an income such as full-time housewives or students.

There is an extra 200,000 JPY income tax allowance for those with employers who file their employees end of year tax adjustments for them. But that is only for income tax. The resident tax return still need to be filed.

[MajesticSoup]

Would this then require filing a 確定申告 at the end of the year?

Yes. If you sell crypto or convert one form of it to another, that's a taxable event and you are supposed to declare it.

However, I believe there is a 380,000 yen allowance. So you only have to declare if you made more than 380k. But don't quote me on that - I just did a quick search.

This article looks helpful (Japanese): https://advisors-freee.jp/article/categ ... l-01/9456/

I think the 380,000 JPY is your annual income tax free allowance that every resident is entitled to. The site you linked also mentioned 330,000 JPY resident tax free allowance too. The website also seems outdated because the income tax free allowance increased to 480,000 JPY and the Resident tax free allowance increased to 430,000 JPY in 2020.

If you're working and earning a living, chances are you earn over 480,000 JPY (and 430,000 JPY) per tax year. So like FX gains you still have to declare all crypto currency gains as miscellaneous income.

The website mentions

"③専業主婦や学生など
仮想通貨による利益（所得）と他の所得が38万円を超えた場合
38万円を超えると所得税を払わなければならないだけでなく、扶養の配偶者控除からも外れることになります。なお、所得税は38万円以上で申告が必要ですが住民税は33万円以上で申告が必要になります。"

That is kind of referring to people they expect to not have an income such as full-time housewives or students.

There is an extra 200,000 JPY income tax allowance for those with employers who file their employees end of year tax adjustments for them. But that is only for income tax. The resident tax return still need to be filed.

To clarify--"gains" is referred to any taxable event, which includes the act of simply sending the crypto to another wallet, right? Or is it on trades?

[TokyoWart]

To clarify--"gains" is referred to any taxable event, which includes the act of simply sending the crypto to another wallet, right? Or is it on trades?

I don't think a transfer would be a taxable event. Taxable events happen when you exchange one thing for something else. The link below is about US taxes but even in Japan if you transfer stock securities from one brokerage firm to another you have not created a taxable event and I would think the same applies to crypto here:

https://tokentax.co/guides/do-you-need- ... pto-taxes/

[Chris]

To clarify--"gains" is referred to any taxable event, which includes the act of simply sending the crypto to another wallet, right? Or is it on trades?

I don't think a transfer would be a taxable event. Taxable events happen when you exchange one thing for something else. The link below is about US taxes but even in Japan if you transfer stock securities from one brokerage firm to another you have not created a taxable event and I would think the same applies to crypto here:

https://tokentax.co/guides/do-you-need- ... pto-taxes/

I think moving from one wallet to another should be fine as long as the wallets remain in your name. If you're transferring to another person's wallet then that would likely trigger a gift tax event.

With exchanging crypto though, the miscellaneous taxable event should only occur when you exchange it for a fiat currency.

I am not sure what the circumstance would be for directly exchanging a crypto currency for another crypto currency would be though e.g directly exchanging BTC for ETH. I guess it would maybe trigger a miscellaneous taxable event based on the fiat value of the BTC and ETH at the date/time the exchange took place?

[ichiokuen]

Hi Adamu,
[/quote]
However, hardware wallet + transaction costs will save you losing huge amounts to the middlemen and even more speculation involved in the crypto funds.
[/quote]

Could you please explain this? What middlemen do we lose money to? I thought that to exchange your crypto to cash you'd need to use an exchange(middleman) anyway.

And how does using a hardware wallet shield you from speculative market movements? Price goes up or down whether you have your crypto in a wallet or on an exchange.

Thanks.