Japan’s ruling Liberal Democratic Party’s Web3 project team has approved a whitepaper laying out recommendations for growing the country’s cryptocurrency industry, which has become part of the national strategy under Prime Minister Fumio Kishida’s administration. However, the move is aimed at creating a friendlier environment for crypto and preventing firms from leaving for other jurisdictions due to heavy tax burdens.
The Web3 project team has been bypassing the usual bureaucratic processes to formulate regulatory proposals for non-fungible tokens (NFTs) and decentralized autonomous organizations (DAOs). Secretary-General of the party’s Web3 project team Akihisa Shiozaki said in an interview: “The cryptocurrency industry has been driven by early adopters, but it will shift to mass adoption from now on.” Shiozaki also pointed out that major players in Japan, including mobile phone operator NTT Docomo and major financial institutions, are entering the market.
Japan’s whitepaper proposes that the country should demonstrate leadership at the Group of Seven (G7) summit this year, where crypto will be discussed. It suggests that Japan should look ahead to the future potential of Web3 and clarify its leading position on technology-neutral and responsible innovation.
The paper also proposes further changes to the tax regulation, including tax exclusions for companies holding tokens issued by other companies that are not going to be traded short term. It emphasizes allowing self-assessments so that investors can carry over losses for three years and that crypto should be taxed only when the assets are exchanged for fiat currency.
Japan’s approach to cryptocurrency regulation differs from other governments, which are looking to put regulations in place to protect consumers. Also, the country is forging ahead with a bid to create a more friendly environment for crypto after firms began leaving due to heavy tax burdens. The Web3 project team’s proposals have been welcomed by many in the industry, as they bypass the usual bureaucratic processes and could help to accelerate the growth of Japan’s crypto industry.
The new white paper highlights the need for increased accounting standards to ensure Web3 companies are able to find auditors, and recommends that ministries and agencies offer their support to the Japanese Institute of Certified Public Accountants in establishing guidelines. It also suggests introducing a DAO law based on Japan’s godo kaisha (a type of business similar to a limited liability company), well as reforms to regulations under the Companies Act and the Financial Instruments and Exchange Act.
The document outlines that while procedures for screening existing tokens are being expedited, those for new tokens issued by foreign entities remain slow, and calls for greater transparency in presenting necessary information for review. Furthermore, it emphasizes the importance of preparing an environment conducive to stablecoin registration, establishing a self-regulatory organization, and developing proposals for yen-backed stablecoins.
While there has been interest from large Japanese firms to explore the Web3 sector, the whitepaper notes that current approvals procedures for banks and insurance companies remain unclear and proposes guidelines to address this issue. In addition, it suggests public-private partnerships in order to formulate guidelines on legal business models for fantasy sports services, as well as the application of data and NFT rights.
The document also suggests appointing a Web3 minister to lead policy promotion and international cooperation, with Japan’s Digital Agency providing a related consultation desk for local governments and businesses. Furthermore, it proposes allowing skilled workers entry into the country through the issuance of crypto visas, along with expanding the startup visa system.
