Venture Capital Firms Granted Approval by Japanese Cabinet to Invest in Cryptocurrency Assets
The Japanese cabinet has given its approval for local investment limited partnerships (LP) firms to acquire and hold cryptocurrencies, according to an announcement made by the Ministry of Economy, Trade and Industry on February 16. This move provides venture capital (VC) firms engaged in crypto with more regulatory clarity and aims to strengthen the strategic investment environment while offering increased support for local startups and medium-sized companies.
The amendment to the Act on Strengthening Industrial Competitiveness represents a significant change in Japan’s policy, as it now allows venture capital firms to invest in projects that exclusively issue cryptocurrencies. Hiro Kunimitsu, the founder and CEO of Gumi Inc., a Japanese game development firm with its blockchain investment fund, gumi Cryptos Capital, emphasized the importance of this development. He noted that Japanese crypto projects were previously forced to seek funding from foreign venture capitalists, which presented numerous obstacles. The ability of Japanese venture capitalists to invest in crypto assets is expected to create significant opportunities for the growing web3 startup scene in Japan.
This decision is part of Prime Minister Fumio Kishida’s “new capitalism” policy, which aims to cultivate Japan’s web3 industry. It follows the cabinet’s approval in December of a revision to the tax regime, which could exempt companies from paying taxes on unrealized profits from cryptocurrencies.
Furthermore, the revision to the Industrial Competitiveness Enhancement Act, which was previously approved, aims to foster new business creation and encourage investment in the industry. This aligns with Japan’s broader strategy to strengthen the country’s economic drivers, with a focus on supporting medium-sized companies and startups.
This legislative change, currently awaiting deliberation in the legislative body, could have a significant impact on how venture capital operates within the web3 domain in Japan, potentially setting a precedent for other countries to follow.
The timing of this decision is noteworthy, as it comes shortly after the Financial Services Agency (FSA), Japan’s top financial regulator, proposed measures to protect users from unlawful transfers involving cryptocurrencies. In response, the FSA and the National Policing Agency (NPA) are urging banks to enhance user protection measures. To achieve this, both agencies are implementing various initiatives, including mandating banks to intensify their surveillance of suspicious transactions heading towards cryptocurrency exchange providers.
