In a major development for the crypto industry, the Japanese government recently announced a significant relaxation of regulations regarding startup capital. This development explicitly allows startups to accept digital assets as an alternative to traditional stocks.
According to Japanese media reportsThis regulatory shift aims to create a more supportive and inclusive environment for startups by diversifying financing options and bringing Japan in line with international standards in its handling of digital currencies.
Paving the way for cryptocurrency-backed startups?
Under the newly established system, startups will now have the opportunity to receive investments in the form of cryptocurrencies through a fund called the Investment Business Limited (LPS). According to the report, the LPS fund consists of multiple funds that invest exclusively in securities issued by startups.
This latest development follows the approach taken by Japan’s main financial regulator, the Financial Services Agency (FSA), which on August 31 sought to revise tax laws related to digital currencies.
The FSA’s proposals focus on exempting domestic companies from the “unrealized gains” tax currently levied on cryptocurrencies, which is typically levied at the end of each financial year. Under the current system, Japanese legal entities are required to pay annual taxes on the digital assets they hold, regardless of whether the assets are sold or converted into traditional fiat currencies.
The Japan Financial Services Agency’s amendment aims to bring Japan in line with other countries in that tax on crypto assets only applies when converted into fiat currency.
By exempting companies from “unrealized gains” tax, the FSA aims to create an enabling environment for nurturing Web3 technology and encouraging start-ups that leverage blockchain technology.
Notably, the proposal has the support of the Ministry of Economy, Trade and Industry, increasing its chances of acceptance.
If implemented, the reform could have a significant impact on Japan’s digital market, boosting startups and encouraging innovation in the blockchain space.
Is Japan’s Crypto Ecosystem About to Boom?
The decision to make cryptocurrencies a legal form of investment for startups is expected to have a significant impact on Japan’s digital currency market.
First, these measures can increase accessibility by broadening the pool of potential investors. This broader accessibility may attract a wider range of stakeholders, including individual investors and cryptocurrency enthusiasts, thereby promoting greater democratization of startup financing.
Additionally, startups that accept cryptocurrency investments may enjoy enhanced liquidity. They will have the flexibility to trade or utilize these assets for a variety of purposes, providing additional capital for their growth and expansion.
Additionally, the government’s decision may spur growth in Japan’s digital currency market. Increased demand for cryptocurrencies from startup investments could lead to a surge in trading volumes and market activity. This in turn provides opportunities for existing exchanges and facilitates the emergence of new platforms.
Featured image from iStock, chart from TradingView.com
