Japanese Lawmakers Seek to Establish Fresh Web3 Regulations
According to an interview with CoinDesk Japan, Japanese congressmen Masaaki Taira and Hideto Kawasaki are interested in establishing policies for Web3 in the country. Japan has been exploring ways to regulate Web3. In April 2023, the Liberal Democrat Party's Web3 project team (web3PT) released a whitepaper and committed to discussing the development of various Web3 projects using blockchain technology.
Here are the main points from the interview.
The Liberal Democratic Party's web3 Project Team (web3PT) was crucial in advocating for and achieving tax reform related to holding crypto assets issued by third parties. The reform aims to create a clear regulatory framework, making it easier for investors and large companies to engage in Web3-related activities.
DAO Rulemaking Hackathon: web3PT, under the leadership of Congressman Hideto Kawasaki, organized a "DAO Rulemaking Hackathon" to address the regulatory challenges associated with Decentralized Autonomous Organizations (DAOs). The hackathon facilitated discussions among government officials, ministries, lawyers, and other stakeholders to understand the diverse nature of DAOs and work towards creating a regulatory framework. In late 2023, they organized a hackathon for rulemaking of a decentralized autonomous organization (DAO), where stakeholders could express their opinions to policymakers. According to Kawasaki, also the executive director of web3PT, the hackathon helped identify both short-term and medium-to-long-term issues.
New System Structure: The web3PT underwent a structural change with the appointment of Congressman Kawasaki as the new secretary general, replacing Congressman Shiozaki. This change brought increased momentum and enthusiasm to the team, with a focus on promoting Japan's Web3 strategy.
Flexibility in DAO Definition: The web3PT recognizes the diversity of DAOs and aims to avoid a narrow, strict definition. While there is an acknowledgment of the importance of smart contracts, there is a commitment to address the gray areas and clarify the regulation of DAOs in Japan.
LLC-Type Scheme for DAOs: In the absence of specific legislation, web3PT is considering using a limited liability company (LLC) type scheme for DAOs. This approach is the most compatible with the current legal framework, allowing for the expedited development of regulations.
Timeline for Regulatory Changes: web3PT aims to address issues related to DAOs through amendments to the Cabinet Order by April 1st. The proposed timeline includes urgent proposals, detailed consideration by government agencies, public solicitation of comments, and subsequent ordinance revisions.
Global Collaboration and Ecosystem Development: The significance of web3PT extends beyond Japan, as it actively connects with individuals and organizations involved in Web3 both domestically and internationally. The team aims to support collaborations between startups and large companies to create added value in the Web3 ecosystem.
Impact of Tax Reforms: The Cabinet approved tax reform in December and is expected to facilitate collaboration between startups and major Japanese companies in the Web3 space. The clear tax regulations provide a conducive environment for investors and businesses, potentially attracting overseas businesses back to Japan.
Challenges and Considerations: While the web3PT acknowledges the need for a careful and thoughtful approach to regulation, there is recognition that the rapidly evolving nature of Web3 may lead to new challenges. The team commits to addressing these challenges as they arise and supporting the development of Web3 in Japan.
Focus on Real-world Web3 Applications: web3PT desires to witness the practical implementation of Web3 technologies in various sectors, including the gaming industry, fan communities, and collaborations between startups and large companies on layer 1 and layer 2 chains.
Future Goals: In 2024, web3PT's major goals include implementing tax reform for third-party ownership, developing regulations for DAOs, updating the white paper to reflect short-term and long-term issues, and identifying new policy priorities within the Web3 space.
It is worth noting that there is a need for more clarity around DAOs and whether companies are required to implement a smart contract to be classified as a DAO. Taira, the chair of web3PT, believes that this issue will be resolved with time.
“The next step is to reflect this in the next white paper clearly,” Kawaski said, adding that they would need to develop regulations for DAOs. “Furthermore, we would like to grasp the current situation in areas other than DAOs and identify new important points for policy within web3PT.”
The web3PT successfully convinced the tax system investigation committee of the Liberal Democratic Party to review and pass tax reform for third-party ownership. As a result, the cabinet approved the party's tax reform outline, which included a review of holding crypto assets issued by other companies, in December. Now, Kawasaki aims to ensure the effective implementation of this reform.
How Japan's new regulations will impact the web3 community
The recent efforts by the Japanese government to establish policies for Web3 have the potential to impact the web3 community significantly. The Liberal Democratic Party's web3 Project Team (web3PT) has been instrumental in advocating for tax reforms related to holding crypto assets issued by third parties, which aims to create a clearer regulatory framework and encourage investors and large companies to engage in Web3-related activities.
Also, the DAO Rulemaking Hackathon organized by web3PT aimed to address regulatory challenges associated with Decentralized Autonomous Organizations (DAOs) and promote a better understanding of their diverse nature. These initiatives demonstrate a willingness to embrace Web3 technologies and foster an environment conducive to innovation and growth. However, some concerns remain regarding the definition and classification of DAOs and the requirement for smart contracts. Clarification on these matters will be essential to ensure a smooth transition into the new regulatory landscape. Overall, the developments in Japan signal a positive shift towards integrating Web3 technologies into mainstream society.