Linear Finance Dealing With LUSD Exploit

Katsunobu Katō, a Liberal Democratic Party politician and Japan's Minister of Finance under Prime Minister Shigeru Ishiba's government since October 2024, has said that cryptocurrency assets can play a role in a diversified investment portfolio. Katō made the remarks while speaking at an event that was held in Tokyo related to the subject of crypto assets on Aug. 25, according to Bloomberg. Katō stated:''Crypto assets run the risk of high volatility, but if an appropriate investment environment is created, they can become targets for diversified investment.''Photo by JJ Ying on UnsplashGrowing crypto user baseKatō acknowledged that there is a growing user base in Japan related to digital assets. With that, he intends to work towards the provision of a healthy trading environment in Japan for stakeholders within the digital assets sector. The finance minister added that he has been trying to balance regulation with a need to leave the digital assets sector with sufficient freedom so as to enable the development of innovation. Crypto tax reformIt emerged over the weekend that the Japanese financial regulator, the Financial Services Agency (FSA), intends to include tax reform measures in respect of the crypto sector in 2026 tax revision proposals that it will bring to the Japanese government. It’s expected that the proposals, scheduled for submission by the end of this month, will call for a separate taxation category for digital assets and the implementation of a flat 20% tax rate. Under Japan’s existing tax regimen, crypto trading gains must be reported under the categorization of “miscellaneous income,” with those gains subject to tax rates of up to 55%. The move would bring taxation on crypto trading gains in line with the tax treatment that’s currently in place for equity trading gains. Equities have been given their own category and are taxed at a flat rate of 20%. Reclassifying cryptocurrenciesAdditionally, the FSA plans to propose legislation next year that would result in the reclassification of cryptocurrencies, removing them from their current treatment as a means of payment under the Payment Services Act. The regulator wants crypto to come under the Financial Instruments and Exchange Act, reclassifying it as a financial product. Katō has outlined his party’s commitment to the consideration of reviewing crypto asset taxation. That item was incorporated into his government’s tax reform plan for 2025, while the Japanese cabinet approved a proposal to amend the Payment Services Act back in March. As part of plans to have digital assets categorized as financial products, the FSA is also understood to be interested in broadening the scope of insider trading restrictions. Kato’s remarks are being interpreted as positive for the crypto sector. According to International Monetary Fund (IMF) data, Japan is the world’s fifth-largest economy, with a gross domestic product (GDP) exceeding $4.1 trillion.Source: World Economic Outlook (April 2025)In further positive news for the sector in Japan, it was reported on Aug. 18 that the FSA is likely to approve the issuance of JPYC, a Japanese yen-backed stablecoin, over the course of the coming months.

While many people assumed that Bitcoin hashrate had moved overseas once China implemented a Bitcoin mining ban in 2021, miners within mainland China still dominate the activity. 55% of hashrateThat’s according to a report on X by Ki Young Ju, the founder and CEO of crypto data analytics firm CryptoQuant. Taking to the social media platform on September 23, the CryptoQuant CEO claimed that Chinese mining pools account for 55% of all Bitcoin mining activity.  Since the 2021 ban, an increasing proportion of hashrate has been accounted for elsewhere, including the United States. Ju clarifies that U.S.-based mining pools now account for 40% of Bitcoin hashrate. He added:”U.S. pools primarily cater to institutional miners in America, while Chinese pools support relatively smaller miners in Asia.”Photo by Joshua Sortino on UnsplashShift towards U.S.-based miningWhile the majority of Bitcoin mining is accounted for within China’s borders, Ju acknowledges a growing shift towards U.S.-based mining. Some commentators have speculated that while officially a ban was put in place, in reality the ban presented an opportunity to jettison inefficient mining equipment, selling it on overseas, while maintaining only the most efficient miners within China. Others such as Daniel Batten, an advisor to Nasdaq-listed Bitcoin miner Marathon Digital, went further in suggesting that the reporting of a blanket ban on Bitcoin mining within China was misleading. Instead, he believes that mining was suspended for a time and then rebooted. Taking to X in June, Batten wrote: “Stop referring to it as a ban. It wasn't and it plays into [mainstream media] narratives of Bitcoin mining being unwelcome by nation states.” At the time, rather than Ju’s 55%, Batten estimated that 15% of overall hashrate was accounted for by Chinese miners. Profitability challengesIn the months following the halving of the Bitcoin mining reward, miners have been struggling to maintain profitability. Bitbo data indicates that miner revenue weighed in at $827.56 million in August, representing a 10.5% drop when compared with $927.35 million in July. The situation has raised questions about the ongoing sustainability of securing the Bitcoin network via the current mining model.  Yet despite these adverse conditions, miners have been maintaining the high hashrate level. JPMorgan analysts recently indicated that the Bitcoin hashrate has recovered to pre-halving levels. A report by Decrypt earlier this month claimed that some miners are aggressively purchasing new mining equipment while maintaining significant holdings of Bitcoin rather than selling it off. Alongside what was perceived to be a ban on Bitcoin mining in 2021, China prohibited the trading of cryptocurrencies. Notwithstanding that, it’s thought that many Chinese residents have access to crypto via bank accounts in Hong Kong, connected with global crypto exchanges. Hong Kong is perceived to be China’s sandbox for crypto with many speculating that the current pro-crypto stance taken within the Chinese autonomous territory had been approved by the authorities in mainland China. Whether China will lift its ban on crypto trading remains the subject of ongoing speculation. 

The Asia Web3 Alliance Japan, an agency that regards itself as a bridge between the Web3 ecosystem in Asia and Japan’s broader business sector, has reached out to the Securities and Exchange Commission in the United States with a view towards establishing a strategic collaboration.Photo by Clement Souchet on UnsplashFocus on Web3 regulatory innovation & tokenizationThe President of the organization, Hinza Asif, wrote to SEC Crypto Task Force Chairperson and SEC Commissioner, Hester Peirce, on the subject, on March 25. The letter, subsequently published by the SEC, sets out a proposal that centers on a strategic U.S.-Japan partnership relative to Web3 regulatory innovation and tokenization. The Japanese agency, which has set out cross-border synergy as one of its objectives, calls for collaboration between Japan’s Financial Services Agency, the Japanese Ministry of Economy, Trade and Industry and the Bank of Japan with the U.S. regulator. The Alliance proposes that the goal of that partnership would be the establishment of regulatory clarity in respect of the Web3 sector, together with the fostering of interoperability between a developing Web3 ecosystem in the U.S. and the one that’s developing in Japan. Token classification frameworkDelving deeper into proposal specifics, Asif sets out the formation of a harmonized token classification framework as a key objective. The proposal suggests that a distinction needs to be made between tokenized securities, utility tokens and non-security digital assets.  The alliance believes that right now, token classification is unclear, with projects struggling to understand what category their token falls within from a regulatory perspective. There’s a lack of token offering frameworks. While it sees that further work is required, the Asia Web3 Alliance Japan is encouraged by progress made by the SEC’s Crypto Task Force in identifying security categories. With this cross-border collaboration, the Japanese crypto advocacy group believes that there is an opportunity to achieve regulatory interoperability on an international basis. That would facilitate compliant cross-border token issuance. On that basis, the alliance suggests that standards be developed such that regulatory consistency is achieved internationally when it comes to items such as digital asset trading, custody and token issuance. The proposal sets out a need for reciprocal disclosure requirements between the two jurisdictions where cross-border token issuance is concerned. It advocates for mutual recognition of what it terms “compliant tokenized offerings.” Bringing safe harbor to JapanAnother focus area contained within the proposal is the suggestion of a need to implement a safe harbor approach in Japan for early-stage token projects in line with what has been put forward in the U.S. Peirce first put forward a token safe harbor proposal in the U.S. in 2020. It sets out to provide exemptions over a defined initial period for certain token issuances. The idea behind it is to enable these early-stage projects to innovate and mature without getting bogged down in a regulatory quagmire. The establishment of a U.S.-Japan Web3 regulatory roundtable is another strand contained within the proposal. This would provide a mechanism for ongoing dialogue between stakeholders such as regulators, industry leaders and legal experts.