Japan has said yes to the idea of allowing Japanese venture capital (VC) firms to invest in projects giving out cryptocurrencies only. Before that, there were certain restrictions on buying crypto assets for VCs operating in Japan. This would mark a major adjustment in investment regulations, with its draft amendment being presented as early as 2024.
As per Coinpost’s recent report, the Ministry of Economy, Trade and Industry announced on the 16th that the Cabinet had decided to include crypto assets (virtual currency) among things that can be acquired and maintained by investment business limited partnerships (LPS). Such development enables Japanese VC companies to finance virtual currency-based businesses, thus providing an avenue for funding and doing business for Web3 firms in Japan.
In general, LPS is one type of investment partnership focused on unlisted venture companies that often acts as a vehicle for VC investments. For instance, Web3 projects that were looking for funding from LPS earlier could get only traditional assets like stocks and did not include virtual currencies. Thirdverse CEO Kunimitsu observed that due to the inability to offer crypto assets, many Web3 start-ups had to look for overseas VC investments.
The proposed legal reform is believed to be of benefit to LPS because it will attract more investors and foster growth in Web3 companies. It was disclosed by Nikkei Shimbun in September when it reported on this regulatory change with the government’s intent of submitting a bill to revise the LPS Act to the diet in 2024.
Japan Target Fraudulent Crypto Activities
Meanwhile, Japan’s financial regulatory landscape is also changing. The Financial Services Agency (FSA) has recently proposed measures to be taken against deceitful practices associated with the Peer-to-Peer transactions involving cryptos. With concerns over a large number of fraud transactions linked to virtual currencies, the FSA has formally requested Japanese banks to strengthen user protection measures.
The announcement emphasized stopping unlawful money transfers going to crypto asset exchange service providers. In collaboration with the National Police Agency (NPA), the FSA called for financial institutions to improve user protection measures, including halting transfers if sender information does not match account details for crypto-asset exchanges and increasing monitoring of illegitimate fund flows to such platforms. However, in this development, Japan plans to balance fostering innovation in the cryptocurrency industry and preventing unlawful activities.
