After A Regrettable Web2 Slip, Japan Targets Web3, GameFi, NFTs with Robust Crypto Regulations

Updated: 03 July 2023

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While the globe forged ahead during the Web2 epoch, Japan appeared to maintain a slower pace. However, in this emerging Web3 phase, the Land of the Rising Sun is quickening its stride, aspiring to secure a dominant role in this burgeoning industry.

From Web2 Laggard to Web3 Accelerator

Japan has had an “if it’s not broken don’t fix it” mentality with its internet service for years. Yahoo in Japan looks similar to what the rest of the world’s Yahoo looked like back in 2005. Most of its layouts and graphics also look like they were derived from the internet many years ago.

However, the country is working to spearhead the evolution of Web3. Whereas many other nations are pausing and taking time to deliberate on Web3 and crypto issues, Japan has positioned itself to play a significant role in the crypto business.

According to Akio Tanaka, a founding partner of IVC, in an interview with CoinDesk, “The government really felt that we totally missed Web2…So now they see Web3 as something Japan could potentially embrace and create the new generation of Japanese tech companies and tech visionaries in this space.”

In the US for instance, the SEC has been running a crackdown on crypto firms resulting in the winding down of operations by many companies in the industry. On the other hand, Japan has been opening its arms to welcome such companies by creating a more conducive environment.

Not only is the country focused on growing in the Web3 space, but the government has also made it a national goal.

Last year, Japan released an NFT white paper that discussed NFT and the role they will play in the country’s goal towards a Web3-centered tech industry. However, seeing as NFTs are just but a part of Web3, the country, through a Web3 Project Team, later came up with an “Interim Proposal on web3 Policy”.

The proposal details potential guidelines for every Web3 division from decentralized autonomous organizations (DAO) to non-fungible tokens (NFT). It also offers proposed solutions to some of the unregulated parts of its crypto industry as well as how to conduct some regulatory procedures.

More recently, Japan’s Tax Authority announced that it will exempt unrealized gains on company-issued cryptocurrencies. This offered a huge relief to crypto companies, especially startups that offer their own tokens.

Great news for web3.0 firms in Japan! This move by the Tax Agency will surely encourage innovation and growth in the crypto industry. 🚀:jp: #Web3 #CryptoTaxation

— Web3 Antivirus (@web3_antivirus) June 25, 2023

A Strategic Shift

Unlike the rest of the world’s approach to embracing Web3 and Crypto, Japan has taken a different and more intentional strategy to adopt the technology. For instance, instead of developing GameFi for crypto speculators, developers in Japan are looking to serve gamers in the country.

“They will probably not try to create the same kind of speculative move that you may have seen outside of Japan, because they realize that can actually backfire and negatively impact their core game fans,” Tanaka said.

Video game company Square Enix, for instance, did not impress its fan base when it chose to launch NFTs in its Final Fantasy 7. Despite receiving appraisal for the move from the financial market, the game’s fans kept asking the company to reconsider its move into Web3.

Sega’s announcement of its entry into the NFT market also received a similar reaction from fans. As a result, the company changed its position, declaring that it would decide not to move further if its Web3 endeavor were “perceived as simple money-making.”

All in all, Japan’s regulatory authorities are preparing the country for the new Web3 dawn. By providing comprehensive tax and accounting norms and exerting strict control over operations involving licensed crypto assets.

Unlike the SEC, Japan’s regulators are also assuring prompt resolution of regulatory difficulties through a dedicated desk while reexamining and revising current laws to create a crypto-friendly ecosystem.

By demonstrating how a progressive, well-regulated environment can foster innovation and growth in this cutting-edge industry, Japan is strengthening its position as a key participant in the blockchain industry.