Japan’s ruling Liberal Democratic Party’s Web3 project team has approved a white paper laying out recommendations for growing the country’s industry, which has become part of national strategy under Prime Minister Fumio Kishida’s administration.
While other governments are looking to put regulation in place to protect consumers, Japan is forging ahead with a bid to create a friendlier environment for crypto after firms began leaving for other jurisdictions due to heavy tax burdens.
The Web3 project team has been bypassing the usual bureaucratic processes to formulate regulatory proposals for everything from non-fungible tokens (NFT) to decentralized autonomous organizations (DAO).
“The cryptocurrency industry has been driven by early adopters, but it will shift to mass adoption from now on,” said Secretary-General of the party’s Web3 project team Akihisa Shiozaki in an interview with CoinDesk Japan.
Shiozaki pointed out that major players 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 major financial institutions are looking to issue stablecoins.
The white paper, reviewed by CoinDesk, notes that Japan should demonstrate leadership at the Group of Seven (G7) summit this year, where crypto will be discussed. It proposes 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 these are having tax exclusions for companies holding tokens issued by other companies that are not going to be traded short-term. It advises allowing self-assessments so that investors can carry over losses for three years and that 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 information necessary for review.
Japan passed a framework for regulating stablecoins last year. The new white paper stresses the importance of readying the environment 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. However, the white paper says that approvals for banks and insurance companies entering the industry remain unclear and advises laying out guidelines.
On NFTs, the white paper proposes public-private partnerships to formulate guidelines on kanunî business models for fantasy sports services. It also recommends the public and private sectors work together to sort out veri 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.
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