Japan considers allowing local VCs to invest in crypto and Web3 startups

Japan considers allowing local VCs to invest in crypto and Web3 startups

On February 16, the Ministry of Economy, Trade and Industry announced that the Japanese cabinet had approved a proposal to include cryptocurrencies in the list of assets that local investment limited partnerships are allowed to acquire or hold.

The ministry has announced that it has approved a revision to the Act on Strengthening Industrial Competitiveness. The revised act will expand strategic investment to support local startups and medium-sized companies. According to a news outlet, Coinpost, the revision will allow venture capital firms to invest in projects that issue only cryptocurrencies. The bill has been submitted to the legislative body following cabinet approval and will be further deliberated upon.

Expanding Investment Horizons for Japanese VCs

VCs commonly use limited partnerships to invest in startups that are not listed in Japan, as reported by local news outlet Coinpost.

The Web3 community in the region anticipates an increase in crypto and blockchain startups originating from Japan.

The amendments to 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 unwavering commitment to promoting innovation and catalyzing domestic investment.

Before the bill's approval, Japanese venture capital firms were prohibited from investing in cryptocurrency assets. This restriction led to Web3 startups in Japan seeking support from foreign investors. Masaaki Taira, a member of the House of Representatives in Japan, announced the news of the bill's passage.

“Cabinet decision has been made! Measures will be taken to add crypto assets to the list of assets that can be acquired and held by investment limited partnerships (LPS).”

Japan is working towards resolving legal issues related to launching a digital yen in the spring of 2024. According to a report published on January 26, no official confirmation from either the Bank of Japan (BoJ) or the government regarding the launch of the digital yen. It has been stated that any decision on the matter will be made only after a national discussion, and this discussion is expected to take place no sooner than 2026.

According to Hiro Kunimitsu, the founder and CEO of Gumi Inc., Japanese rules have prevented venture capitalists (VCs) from investing in cryptocurrency assets until recently. Gumi Inc. is a Japanese game development company that has established its own blockchain investment fund called Gumi Cryptos Capital.

Kunimitsu stated in his recent post that Japanese cryptocurrency projects have faced difficulties securing funding due to the need to source capital from foreign venture capitalists. He believes that the ability of Japanese VCs to invest in these projects will present a significant opportunity for Web3 startups in Japan.

Japan's Commitment to Promoting Innovation and Catalyzing Investment

Japan has been working to develop its Web3 industry under the "new capitalism" policy of Prime Minister Fumio Kishida. In December, the Japanese cabinet approved a change to its tax system that may exempt companies from paying taxes on unrealized profits from cryptocurrency.