Japan promotes crypto-friendly Web3 ideas

The Web3 project team of Japan’s governing Liberal Democratic Party has published a white paper containing suggestions for expanding the country’s industry. Prime Minister Fumio Kishida’s administration has incorporated these suggestions into the national strategy.

The Web3 project team intends to circumvent conventional bureaucratic procedures in order to develop regulatory proposals for nonfungible tokens and decentralized autonomous organizations (DAOs), among other things.

In contrast to other nations that are attempting to implement consumer protection regulations, Japan is attempting to create a more welcoming environment for cryptocurrencies, as many companies have relocated to other countries due to high tax obligations.

Japan must demonstrate leadership during this year’s G7 summit, which will address cryptocurrency issues, according to the white paper. The document suggests that the nation prioritize the potential benefits of Web3 and take a prominent stance on technology-neutral and ethical innovation.

In addition, the white paper suggests additional modifications to tax regulations, recognizing that a significant exemption for token issuers has already been granted. These include tax exemptions for companies holding tokens issued by other companies that are not intended for short-term trading.

It proposes authorizing self-assessments, allowing investors to carry forward losses for up to three years, and taxing cryptocurrencies only when they are converted to fiat currency.

The white paper identifies an urgent concern regarding the lack of accounting standards, which has made it difficult for Web3 businesses to find auditors. The document suggests that ministries and agencies collaborate with the Japanese Institute of Certified Public Accountants to develop guidelines.

In addition, it proposes the establishment of a DAO law modeled after Japan’s godo kaisha, which is analogous to a limited liability company. It also proposes amendments to the Financial Instruments and Exchange Act and the Companies Act.

While the vetting process for tokens already in circulation is becoming shorter, the evaluation of new tokens issued by foreign entities remains slow, according to the white paper. It suggests that procedures should be made more transparent so that issuers can provide crucial data for evaluation.

Japan adopted a regulatory framework for stablecoins in 2022. The new white paper emphasizes the importance of creating a self-regulatory organization and preparing the environment for stablecoin registration. It also suggests devising stablecoin proposals supported by the yen.