Japan adopts crypto for startup funding

Japan's regulatory reform permits startups to secure crypto-based funding, diversifying finance and aligning with global digital currency standards

By Shashank Bhardwaj

Published: Sep 18, 2023 04:59:02 PM IST

Updated: Sep 18, 2023 05:12:22 PM IST

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In a landmark development within the crypto industry, the Japanese government has announced a significant shift in regulations concerning startup funding. This change permits startups to accept crypto assets as an alternative to traditional stocks, ushering in a more inclusive and supportive environment for entrepreneurial ventures.

Japan, known for its strong foothold in technology and finance is struggling to keep pace with other advanced countries like China. China is now at the forefront of a global race to develop central bank digital currencies (CBDCs) and has ramped up its efforts in recent years. Accordingly, Japan has opted for this regulatory shift aimed to diversify the financing options available to startups while aligning Japan with international standards in handling digital currencies.

Under the newly established system, startups now have the opportunity to receive investments in the form of crypto through a fund known as the Investment Business Limited Partnerships (LPS). The LPS fund comprises multiple segments dedicated to investing in securities issued by startups, offering an alternative to traditional venture capital funding.

This new regulatory overhaul has garnered significant support from the Ministry of Economy, Trade, and Industry. Japanese Prime Minister Fumio Kishida also reaffirmed the country’s commitment to fostering the web3 industry in a keynote address at the WebX conference in Tokyo, Japan. He highlighted the potential of web3 to transform the internet and kindle social change. The broad consensus around these reforms strengthens the likelihood of their swift acceptance and implementation.

Furthermore, startups that receive crypto investments may benefit from enhanced liquidity. This flexibility allows them to trade or utilise these crypto assets for various purposes, providing additional capital for growth and expansion.

Beyond the immediate impact on startups, the government's decision is expected to stimulate the growth of the digital currency market in Japan. The increased demand for cryptos from startup investments could lead to a surge in trading volume and market activity. This, in turn, presents opportunities for existing crypto exchanges and fosters the emergence of new platforms.

Japan's proactive approach to regulatory reform positions it as a forward-thinking player in the global crypto landscape. As the country takes bold steps to nurture a thriving crypto ecosystem, it sets a precedent for other nations to adapt to the evolving financial paradigm shaped by digital currencies and blockchain technology.

The writer is the founder at yMedia. He ventured into crypto in 2013 and is an ETH maximalist. Twitter: @bhardwajshash