Japan Approves Web3 White Paper to Promote Industry Growth in the Country
The document proposes more tax reforms, clearer accounting standards and a DAO law.
Japan's ruling Liberal Democratic Party's Web3 project team has published a white paper laying out recommendations for boosting the crypto industry in the country, which is part of Prime Minister Fumio Kishida's strategy of promoting technology, a project called "Cool Japan."
While other governments are looking to put regulation in place to protect consumers, Japan is trying to create a friendlier environment for crypto after firms began leaving for other jurisdictions because of heavy tax burdens.
The Web3 project team has been bypassing the usual bureaucratic processes to formulate regulatory proposals for everything from NFTs to decentralized autonomous organizations.
“The cryptocurrency industry has been driven by early adopters, but it will shift to mass adoption from now on,” Akihisa Shiozaki, secretary-general of the party's Web3 project team, said in an interview with CoinDesk Japan.
Shiozaki pointed out that major companies in Japan have started to enter the market. Japanese mobile phone operator NTT Docomo pledged to invest up to 600 billion yen ($4 billion) into Web3 infrastructure and large financial institutions are looking to issue stablecoins.
The white paper notes that Japan should demonstrate leadership at the Group of Seven summit this year, where crypto will be discussed, and says the country should look ahead to the future potential of Web3 and clarify its leading position on technology-neutral and responsible innovation.
It also proposes further changes to tax regulation, noting that one significant exemption for token issuers has already been approved. Among the proposals is having tax exclusions for companies holding tokens issued by other companies that aren't going to be traded short term. It advises allowing self-assessments so that investors can carry over losses for three years and says crypto should be taxed only when the assets are exchanged for fiat currency.
The document identifies a lack of accounting standards as an urgent issue as Web3 companies have had difficulties finding auditors. It says that ministries and agencies should support the Japanese Institute of Certified Public Accountants in formulating guidelines.
It also advises setting up a DAO law based on Japan's godo kaisha (a type of business similar to a limited liability company) and making changes to regulations under the Companies Act and the Financial Instruments and Exchange Act.
The white paper notes that the screening process for tokens already in circulation is shortening but reviewing new tokens issued by foreign entities remains slow. It advises making procedures more transparent so that issuers can present the information necessary for review.
Japan passed a framework for regulating stablecoins last year. The new white paper stresses the importance of creating a process for stablecoin registration and establishing a self-regulatory organization. It also mentions developing proposals for yen-backed stablecoins.
Large companies in Japan have shown interest in the Web3 industry. The white paper, however, says that approvals for banks and insurance companies entering the industry remain unclear and says the government should lay out guidelines.
On non-fungible tokens, the white paper proposes public-private partnerships to set guidelines on legal business models for fantasy sports services. It also recommends the public and private sectors work together to sort out data and NFT rights, and consider ways for content holders to legally license NFTs.
A Web3 minister should take charge of promoting policies and cooperation with other countries, according to the document. It says that Japan's Digital Agency will set up a related consultation desk for local governments and business operators.
It also proposes the issuance of crypto visas to skilled workers and expanding the startup visa system.
Update (April 6, 2023 10:28 UTC): Adds link to published white paper in first paragraph.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.
Learn more about Consensus 2024, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.