On Friday Japan’s Cabinet approved a Bill, the Industrial Competitiveness Enhancement Act. Assuming the legislation passes, one of the clauses will allow limited liability partnerships (LLPs) to invest in crypto asset tokens. Most venture capital (VC) firms are LLPs.
Last year we reported that the plans were in progress. At the time, there was a discussion about dropping the requirement for LLPs to invest half their assets domestically. We don’t believe that is part of the bill.
The fact that VCs have been prevented from investing directly in tokens may have discouraged some VCs from investing in web3. However, those focusing on the sector will have found workarounds. It may have encouraged some to push their investments outside of Japan. For example, SBI set up a fund in Singapore, and Nomura’s digital asset arm Laser Digital is based in Switzerland.
Last year Japan’s biggest bank, MUFG, was exploring the creation of crypto trusts, allowing VCs to invest indirectly in crypto tokens via trusts.
Japan is amongst the more advanced economies when it comes to blockchain and web3. The news is timely as the Financial Services Agency (FSA) is launching the inaugural Japan Fintech Week in early March.
Compared to most jurisdictions, Japan has a larger volume of real world asset (RWA) tokenization, especially in real estate. Some of it targets retail investors.
It also has one of the more advanced legal frameworks for stablecoins, allowing multiple different types. These include trust-based stablecoins and bank deposit tokens. Both Circle and Binance have announced initiatives in Japan. Additionally, Japan’s NFT sector didn’t suffer quite as big a lull compared to the West.
