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Japan’s cabinet recently approved a bill that will open up the Web3 space to investment funds and venture capital firms in the country.
This development came barely a month after the U.S. SEC gave the green light to 11 Bitcoin Spot ETFs; however, unlike Japan which recognized cryptocurrencies as a type of money as early as 2016, alongside leading the race in stablecoin regulatory frameworks, the U.S. is still reluctant to fully embrace the realm of Web3 innovations.
With Japan seemingly going all in, both on the regulatory front and user protection, the latest move to add crypto as a potential asset class is a game-changer for the country’s investment landscape and the Web3 startup ecosystem.
In fact, this milestone might play a significant role in shaping the decision-making process of Web3 startups looking to change jurisdictions or launch in crypto-friendly countries.
After all, the Land of the Rising Sun has long been a leading technology hub, and its open arms approach to Web3 should come as no surprise.
Japan is a Digital Asset Hub in the Making!
So, what will be the likely impact of VCs and Investment firms in Japan finally getting access to the Web3 market?
Of course, we cannot rule out the possibility that it may take a while before a paradigm shift is evident, but from a longer-term perspective, the approval could position Japan as a favorable jurisdiction for both VCs and Web3 startups.
For starters, more risk-on capital will gradually find its way into the Japanese Web3 startup space.
Nomura is one the big banks in Japan that has already shown interest in exposing their institutional clients to crypto assets.
Last year, the bank’s digital asset subsidiary, Laser Digital, launched a Bitcoin Adoption Fund for this purpose.
“Technology is a key driver of global economic growth and is transforming a large part of the economy from analogue to digital. Bitcoin is one of the enablers of this long-lasting transformational change and long-term exposure to Bitcoin offers a solution to investors to capture this macro trend.” – Head of Laser Digital Asset Management, Sebastien Guglietta.
With more financial juggernauts likely to join the trend and crypto investors fleeing harsh jurisdictions, it is only a matter of time before the capital find its way into the Japanese crypto market.
Japan is also emerging as one of the most innovative countries when it comes to blockchain gaming applications.
To provide some context, the latest statistics reveal that the blockchain gaming market was valued at $4.9 billion in 2022 and could surge to a valuation of $818 billion within the next decade.
Japan’s crypto market is a significant contributor to this growth, accounting for a good share of users in play-to-earn games such as Stepn.
This interest in blockchain gaming, and especially those that have ecosystem rewards, is partly because of the country’s familiarity with an almost similar ingrained practice dubbed poikatsu, a loyalty points culture.
Additionally, Japan-based Web3 gaming protocols such as Oasys are making it seamless for developers and to create reward-based Web3 games.
Web3 developers can deploy customized gaming ecosystems on Oasys, featuring multiple genres of play-to-earn games and metaverses, from light casual games to heavy FPS and MMORPGs.
This decentralized blockchain gaming protocol is among the few Layer 1 blockchains with superior performance, thanks to its dual-layer approach.
It would also be unfair not to mention Japan’s progress on its crypto regulatory framework.
The country has come a long way since 2014 when the largest crypto exchange at the time, Mt. Gox, was hacked.
Instead of stifling crypto, Japan took a more proactive approach and has since passed several regulations to oversee the crypto market.
Most notably, FTX Japan was among the first subsidiaries to commit that it would give clients access to their funds after the infamous exchange collapsed in November 2022.
This was facilitated by the country’s stringent policies designed to protect crypto users.
Conclusion
As the U.S. continues to go after big brands in the Web3 space, with the most recent being KuCoin crypto exchange, which is being sued by the U.S. CFTC for violating the country’s anti-money laundering rules, Japan is making it possible for more institutional investors to gain user-protected access to opportunities in the crypto market.
The move to allow VCs to spur the growth of the Web3 ecosystem comes as a big boost to Japan’s reputation as one of the few countries that has provided clear regulations.
But more importantly, it will be instrumental in enabling regulated deal flow environments, which are much needed for crypto to be embraced on a macro level.
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