Japan's Embrace of Web3 Uncertain as Ruling Party Under Threat

Japan’s Prime Minister Fumio Kishida and his ruling Liberal Democratic Party (LDP) have shepherded the country’s Web3 strategy along with a host of regulations and plans for the crypto sector. A major corruption scandal, however, bodes ill for Kishida and the party’s future – leaving the country's crypto progress on uncertain footing.

The LDP has maintained power for nearly 70 years, with brief interruptions in 1993 and 2003. The party faces by-elections this month and is set to have its party leadership election this September, which some political analysts say might see Kishida, who called Web3 “a new form of capitalism,” replaced as president of the party and – consequently – as prime minister of Japan.

In 2023, Japan became one of the major jurisdictions to regulate stablecoins, which are crypto assets tied to the value of other currencies. When much of the world collectively detached itself from the scandal-ridden cryptoverse amid the market collapse of 2022, Kishida’s government saw it as an opportunity and a pillar for economic growth.

Kishida’s cabinet has a Web3 project team, which last year released a white paper outlining the national non-fungible token (NFT) and decentralized autonomous organization (DAO) strategy, which is now working to introduce new Web3 policies. The LDP is also proposing corporate tax cuts, and making way for venture capital firms to hold crypto. It’s unclear how these efforts may be affected by the party's shaky future.

The LDP’s Web3 white paper has manifested in more than 160 active Web3 projects across the country, many of them focused on revitalizing Japan’s vanishing traditions and rural villages.

Kishida has vowed to take disciplinary action against party members involved in the scandal, which saw three lawmakers and a handful of political aides arrested on accusations of taking kickbacks, before the lower house of parliament is dissolved.