Bitget App

Trade smarter

Japanese Cryptocurrency Market Overview Report

View original

PANews2024/05/11 08:43

By:MIIX Capital

The cryptocurrency market in Japan presents unique characteristics in terms of regulation, investment, and innovation. From risk mitigation to tax policies, efforts are being made in all aspects to promote the industry's development. Regulation is strict but proactive, providing a relatively stable environment for entrepreneurs and investors. However, high tax burdens and lengthy approval processes remain the main challenges for industry development.

Introduction

In the cryptocurrency market, seclusion and independence are the inherent impressions many people have of Japan. Often, its presence is not strong, making it easy to overlook. In comparison to other markets in the Asian region, Singapore, Hong Kong, and South Korea are more frequently mentioned and focused on.

However, as the world's third-largest economy and a region that established its position in cryptocurrencies early and formulated regulatory frameworks, Japan has unique advantages and market characteristics. With the government strongly embracing cryptocurrencies and driving industry development, new changes and opportunities are gradually emerging.

1. Macroeconomic Indicators and Current Situation

Japan has a strong and well-developed financial system, laying a solid foundation for the country's blockchain and Web3 technology development. When discussing the Japanese cryptocurrency market, regulation becomes a key focus.

The country maintains strict regulatory measures to uphold investor stability, market security, and overall integrity. While these regulations aim to protect the industry, the compliance complexity and high tax burden associated with cryptocurrency-related profits may pose obstacles to the entry and expansion of smaller cryptocurrency enterprises. Additionally, the lengthy token listing approval process may create a perception of reduced market activity.

1.1 Geographic Location and Population Size

Japan is an island nation in East Asia, located in the northwest Pacific Ocean as part of the Ring of Fire. It spans a group of islands consisting of 14,125 islands, with five main islands being Hokkaido, Honshu ("Mainland"), Shikoku, Kyushu, and Okinawa, along with nearly 4,000 smaller islands. Japan is closest to the Russian Siberian region, while South Korea and China are further south. Tokyo is the country's capital and largest city, followed by Yokohama, Osaka, Nagoya, Sapporo, Fukuoka, Kobe, and Kyoto.

According to United Nations data, Japan has a population of nearly 125 million, with nearly 122 million being Japanese nationals (estimated in 2022), accounting for 98.1% of the total population, with the remaining being minority foreign residents, including indigenous Ainu people, Ryukyuans, Koreans, Chinese, Filipinos, Brazilians mostly of Japanese descent, and Peruvians mostly of Japanese descent.

Japan is the fastest-aging country in the world, with the highest proportion of elderly population, comprising one-third of its total population, accompanied by an increase in life expectancy and a decline in birth rates. Japan's total fertility rate is 1.4, below the replacement rate of 2.1, ranking among the lowest in the world; the median age is 48.4 years, the highest globally. The Japanese government projects that by 2060, each working-age person will correspond to one elderly person. Immigration and incentives for childbirth are sometimes suggested as solutions to provide young workers to support the country's aging population.

1.2 Economic Structure and Characteristics

Japan is the world's fourth-largest economy, following the United States, China, and Germany (Germany surpassed Japan to become the third-largest economy in 2023), with its economy primarily composed of the service industry, manufacturing, and import-export business. Japan's economic characteristics reflect its high level of industrialization, strong external dependence, and unique economic structure and organizational forms:

The service sector accounts for about 70% of Japan's GDP, renowned for wholesale and retail trade, real estate services, as well as professional, scientific, and technical activities;
High level of industrialization, leading in the global electronics and technology fields, with agriculture not playing a major role;
Primarily focused on processing trade, importing raw materials and fuel, exporting products to expand international markets, ranking as the world's fifth-largest exporter and fourth-largest importer;
Majority of businesses are located in the narrow coastal belts along the Pacific Ocean and Seto Inland Sea, facilitating import of raw materials and export of products;
Manufacturers, suppliers, and distributors are closely integrated, forming strong corporate alliances with tight teamwork;
Characterized by a seniority-based promotion system and lifetime employment, making it difficult for foreign or new companies to penetrate the Japanese market;

Furthermore, demographic changes significantly impact its economy, with Japan facing issues such as a declining proportion of the labor force, aging population, and decreasing birth rates, leading to a decrease in housing demand, suppressed capital accumulation, reduced investment returns, subsequently affecting economic activities and innovation.

1.3 GDP Ranking Overtaken by Germany

According to Kyodo News on February 15, 2023, Japan's nominal Gross Domestic Product (GDP) for 2023 was $4.2106 trillion, lower than Germany's $4.4561 trillion, dropping to the fourth position globally. Japan losing its status as the "world's third-largest economic power" is not accidental but rather an inevitable result of its long-term lack of stable growth momentum. In October 2023, the International Monetary Fund (IMF) had previously predicted that Japan's nominal GDP would be surpassed by Germany in 2023, so when this result was officially announced, it did not cause much public outcry or backlash, as Japanese society seemed to accept this outcome calmly.

Japan's long-term lack of stable growth momentum is the underlying reason for Japan's nominal GDP being overtaken by Germany in 2023, making it imperative for the Japanese government to find long-term growth momentum to drive Japan's economic development. If the economy continues to stagnate in the next three to five years, this will become a real issue for Japanese society.

1.4 Inflation Rate Data

In March 2024, Japan's annual inflation rate decreased from a three-month high of 2.8% in February to 2.7%, aligning with market expectations. Prices slowed down in transportation (2.9% vs. 3.0% in February), clothing (2.0% vs. 2.6%), furniture and household goods (3.2% vs. 5.1%), healthcare (1.5% vs. 1.8%), communication (0.2% vs. 1.4%), and culture and entertainment (7.2% vs. 7.3%). Meanwhile, food (4.8%), housing (0.6%), education (1.3%), and others (1.1%) maintained stable inflation rates. At the same time, the price decline for fuel and light sources was the smallest in the past year (-1.7% vs. -3.0%), with electricity (-1.0% and -2.5%) and natural gas (-7.1% vs. -9.4%) experiencing a slowdown in the rate of decline.

The Bank of Japan ended its negative interest rate policy last month, breaking free from a decade-long super loose monetary policy. The market is looking for clues on when the Bank of Japan will raise interest rates again. The Bank of Japan stated that achieving a benign cycle of stably reaching the 2% price target and strong wage growth is crucial for policy normalization.

Additionally, the Bank of Japan is focusing on whether service prices will rise along with wage growth. This year, Japanese corporate wage increases are the largest in 33 years, but real wages have been declining over the past two years after adjusting for inflation. A Japanese Ministry of Internal Affairs official pointed out on Friday that the recent wage increases have not yet been reflected in service prices.

1.5 Japan's Legal Tender

The Japanese Yen (Japanese: 円, Romaji: en, English: Yen), with its banknotes known as Japanese Banknotes, is Japan's legal tender and is often used as a reserve currency after the US Dollar and Euro. The Yen was established on May 1, 1871, with four denominations of banknotes in circulation: 1000, 2000, 5000, and 10,000 Yen, and six coin denominations: 1, 5, 10, 50, 100, and 500 Yen.

Interestingly, the issuer of Yen banknotes is the Bank of Japan ("Bank of Japan - Japanese Banknotes"), while the issuer of Yen coins is the Japanese government ("Japan"). Furthermore, Yen coins do not have unlimited legal tender capability, so in principle, the maximum legal use limit for the same denomination coins in a single transaction is 20 coins (i.e., the maximum payment capacity of coins is 1 Yen × 20 coins + 5 Yen × 20 coins + 10 Yen × 20 coins + 50 Yen × 20 coins + 100 Yen × 20 coins + 500 Yen × 20 coins = 13,320 Yen), and merchants have the right to refuse payment beyond this limit.

Despite the Federal Reserve and other central banks actively raising interest rates in 2022 and 2023 to curb inflation, the Bank of Japan has kept rates at zero and continues to print a significant amount of legal tender. In 2023, Japan's core inflation rate rose by 3.1%, marking the largest increase since 1982.

Inflation weakens the purchasing power of legal tender and prompts investors to allocate funds to alternative assets with attractive value storage properties like Bitcoin and gold. Unless the Bank of Japan accelerates the exit from its planned super loose monetary policy, the US Dollar will continue to appreciate against the Yen, making it more attractive relative to other assets.

2. Current Situation and Characteristics of the Cryptocurrency Market

Japan has been actively nurturing the web3 industry, with the government releasing a web3 white paper, reforming taxation, attracting investments, and announcing a five-year policy for startup development, aiming to increase the number of Japanese startups to 100,000 within five years and invest approximately 100 trillion Yen to create 100 unicorn companies.

2.1 Strong Government Support for Blockchain Development

The ruling party's Web3 project team released a white paper on April 6, 2023, viewing Web3 as a national strategy. For

The Japanese government has invested a significant amount of resources in promoting research and application of blockchain technology. For example, the Japanese Cabinet Office has established multiple special funds to support innovation in blockchain technology and research on practical applications. Additionally, the Japanese government is actively promoting international cooperation by exchanging and collaborating with other countries on the establishment of standards and regulatory frameworks for blockchain technology. Japan's application of blockchain technology covers various aspects such as real estate registration, identity authentication, interbank clearing, Bitcoin insurance, and supply chain finance. Here are some specific examples: - Real Estate Registration: The Japanese government plans to integrate national real estate data, approximately 230 million land plots and 50 million buildings, into a single blockchain ledger to enhance data visualization, accuracy, and security. This project is currently in the testing phase and is expected to be completed within the next five years. - Identity Authentication: The Financial Services Agency of Japan (FSA) has developed a blockchain platform that allows customers to share personal information among multiple banks and financial institutions and open accounts using shared IDs. Additionally, SoftBank Group has collaborated with TBCASoft to launch a blockchain-based identity verification project that uses zero-knowledge proof and distributed ledger technology to protect personal identity information from theft. - Interbank Clearing: Fujitsu, in collaboration with Mizuho Financial Group, Sumitomo Mitsui Financial Group, and Mitsubishi UFJ Financial Group, has developed a peer-to-peer remittance service using blockchain technology, improving the efficiency and security of remittances. - Bitcoin Insurance: Due to frequent hacking attacks on Bitcoin exchanges resulting in customer asset losses, Mitsui Sumitomo Insurance Company in Japan has partnered with bitFlyer to introduce a Bitcoin insurance product that provides compensation for Bitcoin assets, covering losses from internal incidents and employee misconduct. - Supply Chain Finance: Mizuho Bank and IBM Japan have jointly developed a blockchain trade finance platform, enabling fast and secure digital exchange of transaction documents and supply chain transaction data, while enhancing transparency and credibility among transaction parties. **2.2 Web2 Giants Enter the Crypto Industry** Investments in the Japanese crypto industry are often led by existing Web2 giants such as securities companies, telecommunications companies, and distributors, rather than venture capitalists (VCs) specializing in web3 investments. One of these giants is the Japanese Web2 giant SBI Group, which has entered the crypto industry through joint ventures and subsidiaries, including: - SBI Digital Asset Holdings: Securities token services - SBI VC Trade: Cryptocurrency trading services - SBINFT: NFT business Other companies that have established and developed subsidiaries and joint ventures specifically for the crypto industry include: - NTT DoCoMo (Japan's largest telecommunications company): NTT Digital - Sony (a leader in the electronics and entertainment industry): Sony Network Communications - SoftBank and LINE: Z Venture Capital **2.3 Popularity and Potential of GameFi and NFTs** Due to policy restrictions, Japan cannot directly invest in tokens or issue tokens, limiting the development of DeFi within Japan. Therefore, in Japan, NFTs and blockchain games are widely regarded as the main participants in its cryptocurrency market. Japan has a globally influential gaming industry, being one of the countries with the highest per capita profits in the global gaming market. The gaming industry in Japan has a long and rich history, providing a solid foundation for the development of crypto games. Japanese players are known for their willingness to pay for high-quality games, making the Japanese blockchain gaming market highly profitable. Japan not only has a rich and long-standing foundation in video game history but also holds the most intellectual property (IP) in the world, including anime, manga, and video games, which have become globally renowned. As a result, Japan's NFT community also has unique aesthetic views and preferences different from other regions worldwide. Additionally, Japan's hot trends are sometimes not synchronized with the global trends, leading to a certain degree of mismatch delay. For example, after the NFT boom in China and the US, Japan experienced a wave of various NFT explosions. **2.4 Market Defensibility and Strong Local Sentiment** The Japanese market is relatively independent and closed, making it challenging for crypto projects to market in Japan due to language barriers (Japanese people's psychological barriers to English) and the cautious tendencies of Japanese Key Opinion Leaders (KOLs). Overall, it belongs to a type of market that is easy to defend but difficult to attack. The strong local sentiment of Japanese crypto users is evident. However, due to some malicious harvesting behaviors of local projects, people's sentiments towards local projects are becoming more complex. Although there is still a tendency to support domestic projects, there is a noticeable lack of confidence. Compared to local projects, local users are not very enthusiastic about foreign projects. Overseas projects need to adapt their products and services to local regulations, translate information into Japanese, collaborate with local KOLs and media, host local events, and engage with localized audiences to gain more visibility and users. It is worth noting that Japanese users have a mindset of actively considering the interests of project parties and businesses. For example, when businesses price their products very low, users will consider whether the businesses can recover their costs, showing a more tolerant and understanding attitude if crypto projects are actively working, Japanese users will demonstrate a more forgiving and understanding attitude compared to users in some other markets, contributing to the creation of a positive community atmosphere. **3. Characteristics of Crypto Users** According to the TripleA agency, over 5 million people, accounting for 4.0% of Japan's total population, currently own cryptocurrencies. This figure has been verified by data from licensed exchanges. Additionally, a report from KuCoin in May 2023 showed that approximately 3.8 million cryptocurrency investors in Japan had owned or invested in crypto assets in the previous six months, accounting for about 5% of Japan's adult population. In Japan, while BTC and ETH are still the favorite crypto assets among investors, there is a significant interest in diversifying into various fields such as NFTs, metaverse, stablecoins, public chains, DeFi, and meme coins. **Male Investors Outnumber Female Investors** **Overview of Japanese Cryptocurrency Investors and Investment Experience** Based on an understanding of various regional markets, men show a higher interest in cryptocurrency investments. However, this phenomenon is most pronounced in the Japanese market, where 80% of investors are male, with only 20% being female investors. Unlike several other markets, the majority of cryptocurrency investors in Japan are aged 30 and above, accounting for 77%. On the other hand, the younger generation aged 18 to 30 represents only 23% of cryptocurrency investors in Japan. Moreover, the maturity level of cryptocurrency adoption in Japan is relatively high. Among the surveyed investors, 27% have been investing in cryptocurrencies for over 3 years, 33% for 1-2 years, and only 9% of respondents have recently started dealing with crypto assets. Cryptocurrency investments are also common in lower-income households, with 44% of investors having a family annual income of up to 5 million Japanese yen. However, only 21% of cryptocurrency investors in Japan have an annual income exceeding 10 million Japanese yen. **Young People Believe More in the Innovative Potential of Cryptocurrencies** Japanese investors turn to cryptocurrencies for other main reasons, including long-term wealth accumulation (40%) and diversification of investment risks and portfolios (38%). While 28% of investors participate in cryptocurrencies because they find it interesting, 26% believe it can lead to overnight wealth. Only 21% of Japanese cryptocurrency investors consider crypto assets as a hedge against inflation. Among them, 44% of investors believe that investing in cryptocurrencies can grasp the future, with the largest group in this category being investors aged 18 to 30, who invest in cryptocurrencies because they believe in their cutting-edge technology and financial innovation potential. **Overall Trading Frequency is Low, Especially Among Investors Over 40** Trading frequency is strongly correlated with age, with the youngest investors aged 18-30 being the most active, trading weekly. Users aged 40-60 trade an average of once a month, while users aged 31-39 do not show any distinct patterns, with some trading weekly, multiple times a week, or multiple times a month. **Investors Over 40 Prefer BTC and ETH** Similar to other regional markets, BTC and ETH are the most popular assets in the portfolios of Japanese users, covering all age groups. Investors aged 40 to 60 are particularly interested in these cryptocurrencies, with 80% of investors expressing interest in Bitcoin and 43% in Ethereum. **Other popular categories favored by Japanese investors include NFTs (27%), Metaverse (24%), stablecoins (16%), and public chain projects (15%); In addition, GameFi (11%), DeFi (8%), and Meme coins (8%) are also gradually gaining popularity.**

Selection for Japanese users' cryptocurrency investments;

Social media is the main channel for people to understand cryptocurrencies

Most Japanese investors learn about cryptocurrencies through social media and Key Opinion Leaders (KOLs), with this trend being most prominent among the younger demographic, where 41% of investors aged 18-30 rely on influential individuals to understand cryptocurrency investments.

Social media platforms that people trust and use include: YouTube (32%), Twitter (23%), Line (15%), Instagram (13%), and TikTok (9%). Data shows that more technically advanced social channels like Discord, Telegram, and Reddit are not trusted by Japanese users, as they perceive these channels to carry higher risks.

4. Current Status of CEX in Japan

According to local regulatory requirements, cryptocurrency exchanges need to obtain a license from the Japanese Financial Services Agency (JFSA). Most licensed cryptocurrency exchanges are registered in Tokyo or Osaka.

Binance Japan known for its diverse range of tokens

Binance Japan, launched in August 2023, was renamed after Binance acquired the local licensed CEX Sakura Exchange BitCoin in November 2022. This move signifies Binance's return to the Japanese market after the country's financial regulatory authority issued a warning in 2021 for operating without permission. Currently, Binance Japan is known for its wide variety of token types and is popular among many users.

Bybit meets the preferences of Japanese investors

Bybit, with custody of over 1,000 cryptocurrencies and compliance with strict Japanese regulations, facilitates seamless entry into cryptocurrency trading. It offers direct local yen deposit options, including bank transfers, JCB cards, and Line Pay, simplifying investment avenues.

Bybit's competitive advantages include low trading fees (starting at 0.01% for market makers and 0.06% for takers), ample liquidity, over $30 billion in daily trading volume, and a vibrant community of over 20 million users, confirming its market-leading position.

Coincheck user-friendly interface with no trading fees

Founded in 2014, Coincheck is Japan's largest cryptocurrency exchange with over 2.5 million users. In 2018, it was acquired by the Japanese financial services company Monex Group, established in 1999, which operates a diverse range of businesses including online brokerage, asset management, and cryptocurrency services.

Coincheck offers a variety of cryptocurrency trading services, attracting a large number of Japanese and international users. With its user-friendly interface and the advantage of no trading fees, Coincheck has become one of the most popular trading platforms in Japan.

Bitflyer popular for its advanced trading tools

Bitflyer is renowned for its advanced trading tools and features, leading in Bitcoin trading volume nationwide. By providing two tailored trading experiences, it effectively caters to the needs of different user groups, from beginners to experienced traders: the intuitive bitFlyer exchange suits novices, while the advanced BitFlyer Lightning is suitable for more complex trading strategies.

BitFlyer has expanded its appeal through innovative features, including unique crypto credit cards, opportunities to earn BTC, and the Bitcoin T-Point exchange. These initiatives solidify BitFlyer's reputation as the third-ranked cryptocurrency exchange platform in Japan, balancing accessibility and depth for a wide range of investors.

Bitbank highest-rated on app stores

Bitbank is the highest-rated cryptocurrency trading app on the Japanese Apple App Store and one of the few in Japan to offer instant account verification services for digital asset exchanges, typically completing verification within minutes.

In addition to trading functions, Bitbank provides lending services, allowing users to lease assets to Bitbank with returns of up to 3%. Third-party institutions highly praise Bitbank's security performance. The platform employs offline cold wallets and Multisig technology to ensure resilience against hacker attacks and safeguard users' asset security with advanced technology.

Zaif known for privacy and security

Zaif has over 500,000 users. Established in 2014, the platform offers a variety of cryptocurrencies, including Bitcoin, Ethereum, and others. Known for its focus on privacy and security, Zaif attracts traders who prioritize these features.

It allows users to buy and sell various cryptocurrencies with Japanese yen and also permits margin trading, suitable for beginners and those looking for quick trades. Since its inception, Zaif has been in a continuous development process, adding new features such as trading, payment services, and currency reserves.

5. Web3 Projects in Japan

Japan's cryptocurrency market has a lower diversity of project types, with a focus mainly on non-fungible tokens (NFTs) and gaming projects, despite also having public chain and DeFi projects. These projects largely concentrate on localized and long-term community building.

Japan Open Chain

Japan Open Chain (JOC) is a practical Ethereum-compatible Layer1 public chain that collaborates with trusted enterprises to provide reliable blockchain infrastructure for businesses and local governments. Operating as compliant blockchain infrastructure under Japanese law, Japan Open Chain offers a secure environment for developing web3 businesses.

INTMAX

INTMAX is a new type of zkRollup, serving as an Ethereum L2 network suitable for various web services and finance. It will enable Ethereum to allow all online citizens to participate in the economy through payment infrastructure and the use of NFTs and community management tokens. INTMAX has made significant innovations in ZK implementation, making it a unique Layer2 rollup network with low costs, security, adjustable privacy, and importantly, scalability.

HashPalette

Palette is a blockchain network for issuing, managing, and distributing digital items. Users can freely transfer ownership of digital items and use them in applications. Palette allows digital projects to be treated as NFTs on its own blockchain, Palette Chain. Palette Chain is a blockchain designed specifically for issuing, managing, and distributing digital items in the entertainment sector, tailored to fit business models. Additionally, Palette Chain can connect to multiple blockchains, including Ethereum, serving as a cross-chain platform for NFT issuance and distribution.

Hashport

<img src="https://img.bitgetimg.com/multiLang/image/b1fa74dce485577b81263f64ad8<p>HashPort is a cross-chain interoperability layer that supports fast and secure cross-network transfer of digital assets. It is developed and provided by the company of the same name, HashPort Co., Ltd., which was established in 2018 with the vision of digitalizing assets and providing blockchain technology consulting and solutions to clients.</p> <h4>KEKKAI</h4> <p>KEKKAI is a Web3.0 security plugin that detects dangers by analyzing transaction simulations, aiming to eliminate fraudulent activities in the growing Web3 space. Users can receive risk assessment information in transactions if they use KEKKAI. If there are any anomalies, KEKKAI will display risk alerts on the page.</p> <h4>Murakami Flowers</h4> <p>Takashi Murakami is a renowned Japanese artist known for his colorful works and unique artistic style. The Murakami.Flowers project (M.F), initiated by him, is a comprehensive project covering art, design, and digital creation. The project revolves around the digital number "108" (composed of 108 backgrounds and 108 small flowers), echoing the numbers related to afflictions or worldly temptations in Buddhism. It signifies the artist's attempt to transcend worldly constraints through digital art.

Crypto Ninja Partners

Crypto Ninja Partners (CNP) is an NFT series themed around Japanese ninjas, originally stemming from a community called NinjaDAO. Although NinjaDAO is not strictly a DAO organization, it gathers numerous cryptocurrency enthusiasts from Japan. Two key figures, Ikehaya (a Japanese NFT KOL and Web Marketer) and Road (another core contributor), have jointly driven the development of CNP.

MetaSamurai

The project's vision is to establish a digital fashion brand and empower creators. The core concept of the project is "I GOT YOUR BACK," symbolizing MetaSamurai's dedication to supporting its NFT holders. The phrase "I GOT YOUR BACK" originates from a story depicting two people protecting each other back-to-back in battle; the spirit of the samurai is to dedicate oneself to protecting the lord; loyal dog Hachiko waited faithfully for its deceased owner for over a decade. These serve as inspirations for MetaSamurai's works.

6. Japanese Crypto Venture

Skyland Ventures

Skyland Ventures (SV) is a venture capital (VC) fund headquartered in Shibuya, Tokyo, focusing on seed-stage startup investments. As of 2022, it has invested in over 120 startups primarily located in Japan. Starting from 2022, the fund aims to make equity/token investments in startups in the Web3 space (cryptocurrency, NFTs, and blockchain). The fund's investments range from around $50,000 to $500,000 in the pre-seed stage, and from $100,000 to $1,000,000 in the seed and later stages. Its founders are Max Kinoshita, Yonkuro Masanori Ikeda, and Yuan Xiaohang.

They collaborate with Hash Global, OKX Ventures, Foresight Ventures, MH Ventures, and Generative Ventures.

Investment History:

Raised a $4 million risk fund for seed-stage startups in 2012.
Invested in 16 companies.
Trasnlimit (providing the BrainWars brain battle game, globally installed 13 million times, supported by LINE and Braindots, with a total download count of 23 million times)
Hachimenroppi (providing a fresh market supported by Recruit and Yahoo! Japan)
Kaumo.jp / CuRAZAY.com (targeting popular websites in Japan, with 4-5 million independent user visits)

Gumi Cryptos

This venture capital firm is a boutique early-stage venture capital firm based in Silicon Valley, with investments spanning information technology, financial services, gaming, insurance, infrastructure, cryptocurrencies, cybersecurity, blockchain, and fintech. It invests in the US, Canada, Europe, Israel, East Asia, South Asia, and Southeast Asia, including Japan. Its co-founder is Zirui Zhang, and its managing partners come from Japan and China.

Some of its key investments include OpenSea, 1inch, and Lit.

CGV Fund

CGV is an Asia-based fund management company focusing on investments in crypto funds and crypto studios. CGV FoF consists of family funds from Japan, South Korea, mainland China, and Taiwan, with headquarters in Japan and branches in Singapore and Canada. The founders are Steve Chiu and Kevin Ren.

They collaborate with Waterdrip Capital, LK Venture, ZC Capital, Satoshi Lab, and Blockchain Founders Fund, among others.

Some projects in their portfolio include AlchemyPay, Bitkeep, Metis, TheGraph, Avalon, and Celestia, as well as recent Bitcoin ecosystem projects - Bitcoin wallet infrastructure UniSat, bitSmiley, and BTC second-layer network ZULU.

BDASH Ventures

BDASH Ventures is a venture capital firm based in Tokyo, Japan, investing in seed, early, and later-stage startups that will be the core of the next generation of technology. The company's CEO is Hiroyuki Watanabe.

B Dash Ventures hosts semi-annual summits for senior tech industry executives and startup founders twice a year, called B Dash Camp. It is now one of Japan's largest invitation-only tech events, attracting over 700 guests from Japan and abroad.

GMO AI & Web3

This crypto venture capital fund is part of GMO Internet Group Inc., a company listed on the Tokyo Stock Exchange. The group also includes GMO Coin, a licensed cryptocurrency exchange in Japan listing 28 cryptocurrencies.

MZ Web3 Fund

The MZ Web3 Fund is led by the self-proclaimed "Musk of Japan," former ZEFounded by friends, MZ Web3 Fund focuses on investing in Web3 projects and is the most active native crypto fund in Japan. MZ Web3 Fund has invested in 24 early-stage projects in the Web3 space, including decentralized storage project SINSO, payment tools Slash and Transak, development community WEB3DEV, gaming public chain Oasys, and Web3 user growth platform Aki Network. MZ Web3 Fund will provide community resources through MZ Club and MZ DAO to help these projects expand rapidly in the Japanese market. ### 7. Cryptocurrency Market Regulation in Japan In the global cryptocurrency market, Japan stands out as a unique market with significant potential in the financial and investment sectors. Due to frequent early attacks on the crypto market by hackers, the Japanese government maintains a conservative stance and exercises cautious regulation over the crypto industry. However, Japan's strong sense of crisis has led authorities to leverage emerging technologies like blockchain to maintain its position as the world's third-largest economy. Consequently, Japan's blockchain industry regulation policies exhibit maturity and stability, fostering a positive environment for blockchain startups. #### 7.1 Legal Status of Cryptocurrencies In 2016, the Japanese Cabinet passed an amendment to the "Payment Services Act," which came into effect in April 2017, providing a legal definition for cryptocurrencies and recognizing their legitimacy. Under the "Payment Services Act," digital currencies are considered as such if they meet all of the following criteria: - Property value recorded electronically on electronic devices or other items - Transferable through electronic information processing organizations - Not denominated in domestic or foreign currencies - Usable for purchasing, renting items, or receiving services from unspecified individuals - Available for purchase or sale to unspecified individuals In essence, Japan acknowledges cryptocurrencies as a legitimate means of payment. The "Payment Services Act" was the world's first legislation to incorporate digital currencies into a legal regulatory framework, holding significant importance for the digital currency market. #### 7.2 Tax Policies on Cryptocurrencies In January 2022, Japan's ruling party, the Liberal Democratic Party, established the Digital Society Promotion Headquarters, initiating the "national strategy." Since then, the Web3 project team in Japan has been directly proposing legislative and regulatory reforms to the ruling party. While many reforms have been adopted, others remain pending. Regarding corporate taxation, to create a "token financing-friendly environment," Japan's Web3 policy team proposed two reforms. Firstly, exempting "enterprise income tax based on year-end market value of tokens held by issuing companies." Secondly, exempting taxes on "tokens issued by other companies and held by third parties for purposes other than short-term trading." The first reform took effect in June 2023, while the second reform was recently proposed by the FSA to be included in the 2024 legislative agenda and has been approved by the Ministry of Economy, Trade, and Industry (METI). Implementing these measures may alleviate the long-standing disadvantage Japanese domestic corporate investors face compared to overseas investors who benefit from more favorable tax treatment. Regarding individual taxation, income from cryptocurrency asset trading is taxed as "miscellaneous income," with a minimum tax rate of 55% when combined with income tax and resident tax. This tax is levied not only when converting held cryptocurrency assets into fiat currency but also when converting them into other cryptocurrency assets, leading to significant capital outflows and hindering taxpayers from reporting taxes. The Web3 policy team proposed four reforms: unifying a 20% tax on cryptocurrency asset trading, taxing only "gains and losses" when converted to fiat currency to exempt "cryptocurrency asset exchanges" from taxation, allowing individuals to carry forward losses for up to three years, and applying the same tax rate to "cryptocurrency derivative trading." However, these reforms were excluded from the 2023 agenda, and it is currently unclear whether these proposals will be part of the 2024 legislative agenda. #### 7.3 Exchange Licensing System and Self-Regulatory Organizations According to the amendment to the "Payment Services Act," institutions engaging in cryptocurrency trading in Japan need to apply for a license from the Japanese Financial Services Agency (FSA) and comply with its regulations. Generally, to operate a digital currency exchange in Japan, the following four basic conditions need to be met: - Entity: Kabushiki Kaisha (stock company) or foreign digital currency trading institution (with a business location in Japan and a representative in Japan) - Registered capital: Possessing a financial base, with a registered capital of over 10 million yen and positive net assets - Corporate system: Having a corporate system capable of properly and effectively conducting business (such as segregating user assets from company assets, establishing effective risk management systems to prevent risks like hacking, system failures, money laundering, and terrorist financing) - Compliance: Complying with relevant laws and regulations, protecting user privacy, fulfilling anti-money laundering obligations, and cooperating with inspections and investigations by the FSA All tokens listed on compliant exchanges in Japan require approval from the Japan Virtual Currency Exchange Association (JVCEA), a process that lasts at least six months to a year, contributing to a lack of dynamism in the Japanese crypto market. In addition to FSA regulation, to enhance industry credibility, transparency, protect investor interests, and promote the healthy development of the cryptocurrency market, Japan established the Japan Virtual Currency Exchange Association (JVCEA) in April 2018, initiated by 16 licensed exchanges under the approval and authorization of the FSA for self-regulation. The association has formulated a series of self-regulatory rules and guidelines, including: - Categorizing and managing cryptocurrencies provided by exchanges based on factors like security, liquidity, and transparency to determine listing conditions - Conducting risk assessments on exchanges, setting limits on leverage ratios, margin ratios, and implementing forced liquidation mechanisms - Requiring exchanges to disclose trading rules, fee standards, and customer complaint handling procedures - Providing consumer education on cryptocurrencies to enhance understanding and risk awareness #### 7.4 Rules for Cryptocurrency Issuance and Financing In September 2019, the JVCEA issued the "New Coin Offering Rules" and accompanying guidelines, allowing public issuance and sale of tokens for financing (IEO and ICO). This marked Japan's first clear regulatory framework for cryptocurrency issuance and financing. According to the rules and guidelines, to issue and sell tokens compliantly in Japan, the following conditions must primarily be met: - The issuer or underwriter must be a licensed exchange and report relevant matters to the FSA and the association - Issued tokens must comply with the association's standards for security, liquidity, transparency, and pass association review - Tokens must have a reasonable pricing mechanism and fully disclose relevant information to consumers - All tokens must be sold out within a specified period, with sales reported to the association Currently, under the "New Coin Offering Rules," the frequency of ICOs/IEOs in Japan is not high. On September 26, 2023, to improve the situation of IEOs, the JVCEA further released an initial proposal for IEO reform. In conclusion, Japan is a country with an open and positive attitude towards blockchain technology and cryptocurrencies. It has established relatively comprehensive and clear regulations in legal, tax, licensing, and self-regulation aspects, continuously exploring and innovating to adapt to the rapid changes and diverse applications of blockchain technology. Japan aims to secure a foothold in the global blockchain industry development. For blockchain entrepreneurs, despite strong localization sentiments in Japan, it remains a fertile ground for the establishment and growth of the crypto industry. ### 8. Summary As early as 2017, Japan officially recognized BTC as legal tender, and in April 2023, the Web3 project team of the ruling party released a white paper, indicating increasing government investment in the industry, leading to the growing prosperity of Japan's crypto market. However, restrictions such as prohibiting direct token investments and the inability to launch token issuance projects internally in Japan have hindered the development of DeFi projects and businesses in Japan, resulting in an industry focus on NFTs and gaming. In terms of compliance, Japan has strict laws and regulations in the crypto field to ensure market stability and investor asset security. However, the high cost of compliance and tax burden have impeded project entry and development. Particularly, the lengthy approval process for token listings often leads to perceptions of market lethargy and loss of confidence in the sector, limiting corporate innovation and market flexibility, causing Japan's cryptocurrency industry to lag behind other countries. With the global penetration and development of the crypto industry, institutional investors in Japan have shown a strong interest in the crypto market and gained a clearer understanding of its potential. The entry of institutional investors has brought more liquidity, stability, and credibility to Japan's crypto market, driving its development and attracting more retail and institutional investors' interest. Amidst the competitive landscape of the crypto market, Japan holds unique advantages in regulatory compliance, GameFi, and NFT sectors. Its robust and sustained community support is an indispensable tool for industry development. However, overly stringent tax policies and investment restrictions continue to pose significant obstacles to the rise and development of the crypto industry in Japan. If policies can be moderately opened under the premise of regulatory compliance, it would be more conducive to the establishment, innovation, and development of the crypto market. The combination of Japan's unique cultural characteristics and strong financial system presents an opportunity for it to become a global leader in the GameFi and NFT sectors, shaping the future of the global crypto industry.

Disclaimer: everything in the article represents the author's point of view and has nothing to do with this platform. This article is not intended to be used as a reference for making investment decisions.