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Japan to Allow Local VCs to Invest in Web3 Startups
On February 16, the Ministry of Economy, Trade and Industry (METI) announced that the Japanese cabinet has approved a proposal allowing domestic venture capitalists (VCs) to invest in Web3 startups. This legal reform will enable Japanese VCs to participate in projects issuing virtual currencies, a privilege previously limited to international investors.
Legal Reforms for Web3 Investment in Japan
The approved revision includes amendments to four key acts, one of which is the Act on Investment Limited Partnership Agreement. This act aims to stimulate the development of startup companies and sectors by increasing domestic investments. With this legal reform, Japanese venture capitalists will gain the ability to invest in projects exclusively issuing virtual currencies.
Benefits for Limited Partnerships (LPs)
Limited partnerships (LPs) also stand to benefit from this reform. LPs are investment partnerships formed to invest in unlisted venture companies. Previously, regulations restricted the transfer of virtual currencies when receiving investments from LPs, limiting the ability of Japanese Web3 startups to seek domestic funding. However, the amendment now permits LPs in Japan to invest in medium-sized companies and startups involved in cryptocurrencies.
Potential Impact on Web3 Community
These new regulations are anticipated to unlock significant opportunities for local projects, potentially leading to an increase in the number of crypto and blockchain startups originating from Japan. The industry has welcomed this move, seeing it as a reduction of barriers for Web3 companies in Japan.
Further Support for Web3 Industry
The amendments to acts such as the Industrial Property Information and Training Center Act, the New Energy and Industrial Technology Development Organization Act, and the Industrial Competitiveness Enhancement Act, demonstrate Japan’s commitment to promoting crypto adoption within its borders.
Streamlining Investment Environment in Japan
Japan aims to boost the agility and efficiency of its investment environment by streamlining bureaucratic processes and minimizing administrative obstacles. For instance, a recent revision to the 2024 tax regime will exempt corporations from paying taxes on unrealized gains from cryptocurrencies if they hold onto the assets for an extended period.
This potential change in the tax framework follows a clarification by the country’s tax agency in June 2023 that crypto issuers would not be subject to the approximately 35% capital gains tax on unrealized gains. Japanese Prime Minister Fumio Kishida has expressed that Web3 is an opportunity for Japanese economic growth, emphasizing the government’s commitment to fostering an environment conducive to the advancement of Web3.
Ian is a cryptocurrency enthusiast blending humor with professionalism. With an engineering background and a storyteller's heart, he simplifies the blockchain world with sharp analysis and a touch of wit. At Cryptowire, he brings his unique perspective to make digital financial innovation accessible to all.
