The Web3 project team of Japan’s ruling Liberal Democratic Party has approved a white paper with recommendations for boosting the country’s cryptocurrency industry which has become part of the national strategy under Prime Minister Fumio Kishida’s administration. While other governments aim to implement regulations to protect consumers, Japan is working to create a more favorable environment for crypto after companies began relocating to other jurisdictions due to high tax burdens. The Web3 project team has been avoiding traditional bureaucratic processes to develop regulatory proposals for everything from non-fungible tokens (NFT) to decentralized autonomous organizations (DAO).
Akihisa Shiozaki, the Secretary-General of the Web3 project team stated that the cryptocurrency industry is transitioning from early adopters to mass adoption. Shiozaki also noted that significant players in Japan are entering the market with NTT Docomo, a Japanese mobile phone operator, promising to invest up to 600 billion yen ($4 billion) in Web3 infrastructure, and major financial institutions exploring the issuance of stablecoins.
CoinDesk’s review of the white paper reveals that it suggests Japan ought to showcase its leadership in the upcoming Group of Seven (G7) summit this year where crypto will be a topic of discussion. The white paper also suggests that Japan should prioritize the possibilities of Web3 and assert its preeminent position in technology-neutral and responsible innovation. Importantly, it points out the absence of adequate accounting standards as a crucial concern for Web3 companies, which have encountered challenges in securing auditors. It advises that ministries and agencies should collaborate with the Japanese Institute of Certified Public Accountants to develop accounting guidelines
In addition, the white paper proposes modifications to tax laws, highlighting that a notable exception for token issuers has already been sanctioned. It advocates for tax exemptions for firms holding tokens issued by other companies, which are not intended for short-term trading. The document recommends allowing self-assessment for investors to transfer losses over three years, and crypto assets should only be taxed when they are traded for fiat currency.
The white paper recommends implementing a DAO law modeled on Japan’s godo kaisha and amending regulations under the Companies Act and the Financial Instruments and Exchange Act. It emphasizes the need to prepare for stablecoin registration and create a self-regulatory organization. The document also acknowledges that while the screening process for existing tokens is becoming quicker, reviewing new tokens from foreign entities is still slow.
The white paper also recommends public-private partnerships to formulate guidelines on legal business models for fantasy sports services and advises the public and private sectors to work together to sort out data and NFT rights, as well as consider ways for content holders to legally license NFTs. It also suggests a Web3 minister should take charge of promoting policies and cooperation with other countries and Japan’s Digital Agency will set up a related consultation desk for local governments and business operators.
Finally, the white paper recommends issuing crypto visas for skilled workers and expanding the startup visa system, while noting that major companies in Japan have expressed interest in the Web3 industry. However, the white paper states that approvals for banks and insurance companies entering the industry remain unclear, and it advises laying out guidelines.
