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Crypto Asset Investment by Venture Capital Firms Approved by Japanese Cabinet

The Japanese cabinet has approved the inclusion of cryptocurrencies among the assets that local investment limited partnerships (LP) firms can acquire or hold. This significant development announced by the Ministry of Economy, Trade and Industry on Feb. 16 provides more regulatory clarity for venture capitalists engaged in the crypto space. The move aims to enhance the strategic investment environment and offer increased support for local startups and medium-sized companies.

The amendment to the Act on Strengthening Industrial Competitiveness represents a major shift in Japan’s policy, allowing venture capital firms to invest in projects that issue cryptocurrencies exclusively. This change holds great importance for the industry, as it opens up new opportunities for Japanese crypto projects, which previously had to rely on funding from foreign venture capitals.

One notable figure, Hiro Kunimitsu, the founder and CEO of Gumi Inc., a leading Japanese game development firm with a blockchain investment fund called gumi Cryptos Capital, emphasized the positive impact of this legislative change. Kunimitsu highlighted how Japanese venture capitalists can now invest in crypto assets, signaling a significant milestone for the burgeoning web3 startup scene in Japan.

Prime Minister Fumio Kishida’s “new capitalism” policy has been driving Japan’s efforts to nurture its web3 industry. The recent approval of a tax regime revision in December, which could exempt companies from taxes on unrealized profits from cryptocurrencies, further demonstrates the government’s commitment to supporting innovation and growth in the sector.

In line with the broader strategy to boost economic drivers in the country, the revision to the Industrial Competitiveness Enhancement Act aims to stimulate new business creation and encourage investment in the industry. By focusing on medium-sized companies and startups, Japan seeks to foster a more dynamic and innovative business environment.

The pending legislative change, currently awaiting deliberation in the legislative body, has the potential to reshape venture capital operations within the web3 domain in Japan, potentially setting a precedent for global practices in the industry.

Timing plays a crucial role in this decision, particularly with recent efforts by Japan’s Financial Services Agency (FSA) to enhance user protection measures in the cryptocurrency space. The FSA and the National Policing Agency (NPA) are working together to prevent unlawful transfers involving cryptocurrencies, urging banks to strengthen their surveillance of suspicious transactions to crypto exchange providers.

These initiatives reflect Japan’s commitment to fostering a safe and transparent crypto ecosystem while also driving innovation and investment opportunities in the digital asset space.

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