Japan’s Web3 project team, a group associated with the ruling Liberal Democratic Party, has released a white paper aimed at expanding the country’s cryptocurrency industry. The document provides suggestions for regulatory proposals related to non-fungible tokens, decentralized autonomous organizations (DAOs), and other aspects of the cryptocurrency industry. The white paper has been incorporated into the national strategy by Prime Minister Fumio Kishida’s administration, signifying the government’s commitment to the growth of the crypto industry.
Japan’s Approach to Cryptocurrency Regulations
Unlike many other governments seeking to implement stringent consumer protection regulations, Japan has been relatively open to cryptocurrencies. The country aims to establish a more welcoming atmosphere for cryptocurrencies, as high tax obligations have led many companies to relocate to other countries. The Web3 project team’s white paper aligns with this vision and suggests that Japan should exhibit leadership during this year’s G7 summit, which will address cryptocurrency issues.
The paper recommends that Japan should focus on the potential benefits of Web3 and establish a prominent stance on technology–agnostic and ethical innovation. Additionally, the white paper highlights that the absence of accounting standards has made it challenging for Web3 enterprises to locate auditors. The document recommends that ministries and agencies assist the Japanese Institute of Certified Public Accountants in creating guidelines.
Modifications to Tax Regulations
The Web3 project team’s white paper recommends several modifications to tax regulations to ease the burden on companies. The white paper acknowledges that a notable exception for token issuers has already been granted, and it suggests additional tax exemptions for companies that possess tokens issued by other firms that are not meant to be traded in the short term. The paper also proposes enabling self-assessments and allowing investors to carry forward their losses for up to three years.
The white paper also suggests that cryptocurrency should only be taxed when it is converted into fiat currency. These recommendations aim to create a more conducive environment for companies to operate in the country and promote the growth of the crypto industry.
Establishing Guidelines and Laws
The Web3 project team’s white paper identifies the need for a DAO law modeled after Japan’s godo kaisha, which is comparable to a limited liability company. The paper suggests modifications to the Companies Act and the Financial Instruments and Exchange Act to facilitate the growth of the crypto industry.
The white paper also highlights the need for more transparent procedures for assessing new tokens issued by foreign entities. While the screening process for tokens already in circulation is becoming shorter, the assessment of new tokens issued by foreign entities is still sluggish. The document recommends making procedures more transparent, enabling issuers to provide essential information for evaluation.
Preparing the Environment for Stablecoin Registration
In 2022, Japan adopted a framework for regulating stablecoins. The Web3 project team’s white paper emphasizes the significance of preparing the environment for stablecoin registration and creating a self-regulatory organization. It also suggests developing proposals for yen-backed stablecoins.
Conclusion
The Web3 project team’s white paper aims to address the challenges faced by Japan’s cryptocurrency industry. The recommendations put forth in the white paper, such as modifications to tax regulations, establishing guidelines for accounting standards, and creating a DAO law, can ease the burden on companies and create a more conducive environment for the growth of the crypto industry.
The government’s efforts to establish a welcoming atmosphere for cryptocurrencies could encourage more companies to operate in Japan, boosting the country’s economy in the long run. With the incorporation of the white paper’s recommendations into the national strategy, Japan’s crypto industry has the potential to grow further.
