Japan is studying the direct investments of venture capital in crypto and Web3 startups

 

Japan is actively considering a groundbreaking initiative to embrace the growing realms of crypto and Web3 technologies by contemplating the possibility of allowing select venture capital firms to directly invest in startups operating in these sectors. This potential revision of laws in Japan about the crypto and Web3 space is seen as a pivotal moment in the nation's journey towards the convergence of finance and technology.

Demonstrating a forward-thinking approach, the Japanese cabinet has given its approval to a proposal aiming to include cryptocurrencies in the list of assets that local limited liability companies can acquire or hold. This announcement, revealed by the Ministry of Economy, Trade and Industry on February 16, underscores Japan's commitment to fostering innovation and supporting the burgeoning startup ecosystem.

According to the ministry's statement, the approved revision involves modifications to the law on strengthening industrial competitiveness, intending to expand strategic investment initiatives that offer crucial support to local startups and medium-sized enterprises. Notably, venture capital companies will be granted the opportunity to invest in projects exclusively dealing with cryptocurrencies, as reported by the local news agency Coinpost.

After obtaining cabinet approval, the bill has been submitted to the legislative body for further deliberation, underscoring the government's dedication to establishing regulatory frameworks that facilitate innovation and investment in emerging sectors.

In the context of venture capital in Japan, limited partnership companies have traditionally served as vehicles for investing in unlisted companies, a common practice for venture capitalists supporting early-stage startups. However, before this proposed revision, Japanese venture capital firms faced limitations in investing in cryptocurrencies, posing a significant obstacle to funding crypto and Web3 projects within the country.

Hiro Kunimitsu, the founder and CEO of Gumi Inc, a prominent Japanese video game development company involved in blockchain investments through Gumi Cryptos Capital, highlighted the challenges faced by Japanese crypto projects in securing funding from foreign venture capital firms. Kunimitsu sees the potential for transformative impact in allowing Japanese venture capital to directly invest in these projects, considering it a significant opportunity for the thriving Web3 startup ecosystem in Japan.

This initiative aligns with Prime Minister Fumio Kishida's vision of fostering a "new capitalism" in Japan, with a specific emphasis on promoting the country's Web3 industry. In pursuit of this objective, the Japanese cabinet had previously approved a revision of the tax regime in December, laying the groundwork for potential tax exemptions on unrealized profits from cryptocurrencies. This measure is aimed at incentivizing innovation and investments in the digital asset space.