Japan progresses bill to enable VCs to hold crypto assets
Japan’s Ministry of Economy, Trade and Industry announced on Friday that it has approved a revision to the Industrial Competitiveness Enhancement Act, with the aim of broadening strategic investment opportunities. According to a local report from crypto publication Coinpost, this move would open avenues for venture capital (VC) firms to invest in projects exclusively issuing cryptocurrencies.
Pending parliamentary deliberation
With cabinet approval secured, the revised bill will now undergo introduction and deliberation in the current session of the Diet, Japan's parliament. If passed, the amendment could pave the way for VC funding of Web3 startups in exchange for crypto assets.
The Ministry highlighted that the amendment aligns with objectives to foster new businesses and industrial investment, with a particular focus on empowering Japan's economy through support for medium-sized companies and startups. Reports of Japan's intention to ease regulations for VC firms investing in crypto startups first emerged in September.
Stablecoin framework
Japan has further work to do to implement a comprehensive overall framework for digital assets. A move by the Japanese Financial Services Agency (FSA) earlier this month to implement measures designed to guard against unlawful crypto transfers is a case in point. The measure doesn’t appear to account for knock-on effects on the peer-to-peer (P2P) transactions market.
However, its stance on crypto regulation is best characterized by efforts to establish a robust legal framework for stablecoins and digital assets. The nation has positioned itself as a global leader in stablecoin regulation, signaling plans to embrace Web3 technologies while maintaining stringent measures to protect users.
Japan's stablecoin regulations, while providing clarity, present challenges for issuers, especially regarding profitability in a low-interest rate environment. Compliance with requirements such as maintaining 100% of assets within Japan's trust accounts poses operational hurdles for yen-based stablecoins.
Recent developments indicate industry players' efforts to navigate regulatory requirements. Mitsubishi UFJ Financial Group, Japan's premier banking conglomerate, has engaged with stablecoin issuers to explore leveraging its blockchain platform.
Web3 hope amid economic difficulties
Japan’s economy has seen better days. Last week, the bitcoin-yen trading pair saw bitcoin reach a record high valuation against the yen. New technologies like Web3 are seen as a potential mechanism for the East Asian country to improve its economic performance. In July of last year, Japanese Prime Minister Fumio Kishida emphasized the country’s commitment to nurturing the Web3 sector within Japan.
Last year, Yudai Suzuki, the founder of a Tokyo-based Web3 incubator, suggested that the country could rediscover its past prowess at the forefront of innovation and technology by embracing blockchain and Web3.
Japan's regulatory approach appears to be shifting to accommodate such sectoral growth and development. Last July, the Japan Blockchain Association (JBA) called on the government to address an issue within the Japanese tax code that was hampering the industry. That tax reform was subsequently implemented in December.
This latest initiative, too, appears to underscore Japan's commitment to fostering innovation and economic growth through enabling further investment into emerging Web3 enterprises.
