Japan’s cabinet has approved a bill that allows venture capital firms and investment funds to hold crypto assets as part of their portfolios. The bill, which was proposed by the Ministry of Economy, Trade and Industry, is expected to boost the development and innovation of Web3 technologies in Japan, such as blockchain, decentralized applications, and non-fungible tokens.

A landmark decision for Japan’s crypto industry

The bill, which was approved by the cabinet on Friday, February 19, 2024, amends the Act on Special Measures Concerning Taxation, which regulates the activities of investment business limited partnerships (LPS). LPS are a type of legal entity that enables venture capital firms and investment funds to invest in startups and emerging technologies.

Previously, LPS were restricted from acquiring and holding crypto assets, such as virtual currencies and non-fungible tokens (NFTs), as they were not considered as securities or assets under the existing law. This posed a significant challenge for Web3 startups in Japan, as they had to rely on overseas investors or alternative funding sources to raise capital.

However, with the new bill, LPS will be able to acquire and hold crypto assets, as long as they meet certain criteria, such as having a clear purpose, a reliable valuation method, and a proper custody arrangement. The bill also stipulates that LPS will have to report their crypto holdings and transactions to the tax authorities, and pay taxes accordingly.

The bill, which was advocated by the Japan Crypto Asset Business Association (JCBA), a self-regulatory organization for the crypto industry, is seen as a landmark decision for Japan’s crypto ecosystem, as it will enable more domestic investors to participate in the Web3 space, and foster the growth and innovation of Web3 technologies and projects in Japan.

A positive signal for Web3 startups and investors

The approval of the bill has been welcomed by the Web3 community in Japan, as it signals the government’s recognition and support for the potential and value of crypto assets and Web3 technologies. Web3, which refers to the third generation of the internet, is a term that encompasses various technologies and applications that aim to decentralize the internet infrastructure and services, and empower users with more control, privacy, and ownership over their data and assets.

Some of the examples of Web3 technologies and applications include blockchain, which is a distributed ledger that records transactions and data in a secure and transparent way; decentralized applications (DApps), which are applications that run on a peer-to-peer network without intermediaries or central servers; and non-fungible tokens (NFTs), which are unique digital assets that represent art, collectibles, gaming, and other items.

Web3 startups and investors in Japan have expressed their optimism and excitement about the new bill, as it will open up new opportunities and possibilities for them to create, share, and access various types of content, services, and experiences using crypto assets and Web3 technologies. The bill will also enhance Japan’s industrial competitiveness and leadership in the global Web3 landscape, as it will attract more talent, capital, and innovation to the country.

A step forward for Japan’s crypto regulation and adoption

The approval of the bill also marks a step forward for Japan’s crypto regulation and adoption, as it reflects the government’s proactive and progressive stance towards the crypto industry. Japan has been one of the pioneers and leaders in crypto regulation and adoption, as it was the first country to recognize Bitcoin as a legal form of payment in 2017, and to establish a comprehensive regulatory framework for crypto exchanges and service providers.

Japan has also been one of the most active and enthusiastic markets for crypto adoption, as it has a large and diverse crypto community, consisting of consumers, merchants, developers, and enthusiasts. According to a report by the Japan Virtual and Crypto Assets Exchange Association (JVCEA), a self-regulatory organization for the crypto industry, the number of crypto accounts in Japan increased by 13.3% in 2023, reaching over 6.5 million. The report also showed that the trading volume of crypto assets in Japan increased by 142.6% in 2023, reaching over 69 trillion yen.

Japan’s cabinet approves a bill that allows venture capital firms and investment funds to hold crypto assets as part of their portfolios. The bill, which was proposed by the Ministry of Economy, Trade and Industry, is expected to boost the development and innovation of Web3 technologies in Japan, such as blockchain, decentralized applications, and non-fungible tokens.