Regulation
Japan’s Early, Swift Approach to Cryptocurrency Regulation Pays Off
Japan lays regulatory foundation to accelerate Web3 adoption
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Japan has been a rare exception when it comes to cryptocurrency regulation. After the catastrophic collapse of Mt. Gox in 2014 – a Japan-based company – the government acted quickly and early to crack down on what was seen as an excessively risky industry. introduces strict rules for operators, placing them under the supervision of the country’s financial regulator.
The move means that ten years later, Web3 in Japan is evolving quite differently from the startup culture that characterizes the sector in other countries. Instead, we are seeing a more widespread trend of large companies entering Web3 through strategic M&A and investment activities.
To date, banking giant Softbank has been one of the most active players, acquire a majority stake in crypto trading platform BITPoint in 2022 and become a key investor in a dedicated Web3 venture capital fund initially established by Deutsche Bank. However, latest newsThat Sony is preparing to launch a rebranded crypto exchange called S.BLOX, following a 2023 acquisition of local platform Whalefin, has created a stir in the crypto community.
I recently spoke to Mai Fujimoto, co-founder of INTMAX, who had just attended the Japan Blockchain Week Summit she hosted in early July. She confirmed that, given the lineup of this year’s event, enterprise entry into Web3 is becoming a trend:
“This [Sony] is just one example among others. We have just welcomed many speakers from large companies [at Japan Blockchain Week]which has stood out on the Web3 conference circuit. I think this is a unique feature of Japan. In the US, Coinbase and Base Chain have contributed significantly to the penetration of Web3 in the country, so we can expect similar synergies to occur in Japan as well.”
Sota Wanatabe, CEO of Startale Labs and founder of the Astar Network, which is already partnering with Sony to develop its own blockchain, also sees this as the start of a growing movement:
“This development demonstrates a serious commitment to Web3 by major Japanese companies. Large companies typically need a year or two to implement such initiatives. With Web3 becoming a national policy in Japan in late 2022, we expect significant developments beyond proofs of concept to emerge soon.”
It refers to a multi-pronged national Web3 strategy initiative launched in 2022 by Prime Minister Kishida Fumio, which saw tax reforms, the introduction of specific rules for assets such as stablecoins and NFTs, and a relaxation of rules allowing investment funds to hold digital assets as part of their portfolio.
Still, the strict and extensive rules mean that launching a digital asset offering from scratch is not necessarily an easy task. Daiki Moriyama, director of gaming-focused blockchain Oasys, believes this could be a key driver of the appetite for M&A. He explains:
“While the proliferation of Web3 increases the potential for industry synergies, setting up a cryptocurrency exchange and obtaining the necessary licenses from scratch requires a significant financial and time investment. Therefore, entering the market by acquiring existing cryptocurrency exchanges in a quasi-bailout is a promising strategy.”
From a smaller operator’s perspective, Japan’s strict regulations can make compliance costs prohibitive for profitable small business operations. Therefore, partnering with larger players represents a more viable way to maintain a brand and tap into the potential of large, established global audiences.
Oasys’ Daiki Moriana also points out that the entry of players like Sony is also symbolic for the industry’s reputation, having the potential to significantly advance the social perception of a field once viewed with skepticism.
Japan is a case study of how regulation that is perceived as relatively strict can nevertheless provide much-needed certainty to established businesses. In this case, it proves to be an effective basis for a Web3 entry strategy through acquisitions and investments, with the potential to boost adoption by new audiences and new vertical markets.