The Web3 project team of Japan’s ruling Liberal Democratic Party has released a white paper containing suggestions for expanding the country’s cryptocurrency industry. The white paper has been incorporated into the national strategy by Prime Minister Fumio Kishida’s administration.
The Web3 project team aims to bypass the usual bureaucratic processes to formulate regulatory proposals for everything from nonfungible tokens to decentralized autonomous organizations (DAOs). In contrast to other governments seeking to implement consumer protection regulations, Japan is striving to establish a more welcoming atmosphere for cryptocurrency, as many companies have relocated to other countries due to high tax obligations.
The white paper recommends that Japan exhibit leadership during this year’s G7 summit, which will address cryptocurrency issues. The document recommends that the nation focus on the potential benefits of Web3 and establish a prominent stance on technology-agnostic and ethical innovation.
The white paper also recommends additional modifications to tax regulations, acknowledging that a notable exception for token issuers has already been granted. These include tax exemptions for companies that possess tokens issued by other firms that are not meant to be traded in the short term. It suggests enabling self-assessments and allowing investors to carry forward their losses for up to three years and proposes that cryptocurrency should only be taxed when it is converted into fiat currency.
Furthermore, the white paper identifies a pressing concern regarding the absence of accounting standards, which has made it challenging for Web3 enterprises to locate auditors. The document recommends that ministries and agencies assist the Japanese Institute of Certified Public Accountants in creating guidelines. Additionally, it suggests that a DAO law be established, modeled after Japan’s godo kaisha, which is comparable to a limited liability company. It also suggests modifications to the Companies Act and the Financial Instruments and Exchange Act.
The white paper highlights that while the screening process for tokens already in circulation is becoming shorter, the assessment of new tokens issued by foreign entities is still sluggish. It suggests that procedures should be made more transparent, enabling issuers to provide essential information for evaluation.
In 2022, Japan adopted a framework for regulating stablecoins. The new white paper emphasizes the significance of preparing the environment for stablecoin registration and creating a self-regulatory organization. It also suggests developing proposals for yen-backed stablecoins.
Japan’s Web3 project team’s white paper aims to address the challenges faced by the country’s cryptocurrency industry. While Japan has been comparatively more welcoming to cryptocurrencies than other countries, it still faces issues such as high tax obligations and the absence of accounting standards. The white paper recommends several modifications to tax regulations to ease the burden on companies, including tax exemptions for non-traded tokens and carrying forward losses.
The paper also suggests establishing guidelines for accounting standards and creating a DAO law modeled after Japan’s godo kaisha. Furthermore, it highlights the need for more transparent procedures for assessing new tokens issued by foreign entities.
The white paper also emphasizes the significance of preparing the environment for stablecoin registration and developing proposals for yen-backed stablecoins.
Japan’s cryptocurrency industry has the potential to grow further, and the Web3 project team’s white paper is a step towards achieving that goal. The government’s efforts to establish a welcoming atmosphere for cryptocurrencies could encourage more companies to operate in Japan, boosting the country’s economy in the long run.