In a landmark decision, the Japanese cabinet has officially sanctioned the acquisition and holding of cryptocurrency assets by local venture capital firms, signaling a significant shift in the nation’s approach to digital currency investment.

Regulatory Clarity for Crypto Investments

On February 16th, the Ministry of Economy, Trade and Industry announced a pivotal amendment to the Act on Strengthening Industrial Competitiveness. This amendment provides venture capitalists with the much-needed regulatory clarity to invest in cryptocurrency projects, thereby fostering a strategic investment environment and supporting local startups and medium-sized enterprises.

Impact on Japanese Startups and VCs

Hiro Kunimitsu, CEO of Gumi Inc., underscores the significance of this development. He notes that Japanese cryptocurrency initiatives previously faced challenges in securing funding domestically and had to turn to foreign VCs. The new policy is anticipated to unlock considerable opportunities for the emerging web3 startup ecosystem in Japan.

A Shift Towards ‘New Capitalism’

The recent legislative change is part of Prime Minister Fumio Kishida’s “new capitalism” policy agenda, which aims to nurture the web3 industry in Japan. This development follows the cabinet’s approval in December of a tax regime revision, potentially exempting companies from taxes on unrealized cryptocurrency profits.

Broader Economic Strategy

The amendment is aligned with Japan’s overall strategy to strengthen the country’s economic pillars, with a focus on bolstering support for startups and medium-sized businesses. This legislative update is currently awaiting further deliberation and could substantially influence venture capital operations within Japan’s web3 space.

Enhanced User Protection Measures

The timing of this policy change is noteworthy, coming soon after the Financial Services Agency (FSA) proposed measures to protect users from illegal transfers, including those related to cryptocurrencies. In response, the FSA and National Policing Agency (NPA) are calling on banks to improve user protection measures and are launching initiatives to monitor suspicious transactions more closely, especially those directed towards cryptocurrency exchanges.