The Japanese government recently announced easing its strict stance against fundraising using cryptocurrency. With the latest development, startups can now raise funds in crypto assets in addition to traditional stocks, as was previously the case.
Positive Regulatory Shift For StartUps
According to reports, the move marks a turning point in the country’s crypto regulatory landscape following the restrictions placed on the use of digital assets. The new reform aims to create an inclusive environment for businesses to flourish in the country.
In addition, the aim is to expand startups’ funding options while aligning Japan’s approach to digital currencies with global benchmarks. Consequently, Japanese startups will see renewed possibilities once this new framework is implemented.
They can secure investments using cryptocurrency through an initiative dubbed the Investment Business Limited Liability Union (LPS). According to the disclosure, the LPS fund is divided into several specialized divisions that back securities issued by the businesses involved.
Furthermore, the recent development follows Japan’s financial watchdog, the Financial Services Agency (FSA), move last month to amend the country’s tax law to accommodate digital assets. On August 31, 2023, the FSA proposed reforming the tax code concerning digital currencies.
One of the highlights of the FSA’s proposal is the exemption of local businesses from the prevalent “unrealized gains” tax on crypto assets levied at the end of each fiscal year. The current system requires corporate entities to pay annual taxes on their cryptocurrency holdings, whether these assets are traded or converted into traditional fiat currency.
The regulator’s revision aims to align Japan with other jurisdictions where taxes on crypto assets are only paid upon conversion into fiat currency. By exempting firms from the “unrealized gains” tax, the government hopes to create an enabling ecosystem for nurturing Web3 technologies and startups that leverage blockchain advancements.
Expectedly, the proposal has been backed by the Ministry of Economy, Trade, and Industry, increasing its chances of approval. If passed, this reform would significantly impact Japan’s digital asset and finance landscapes, promoting innovation in the blockchain space.
Analysts opine that this transformative move by the government will impact the cryptocurrency market in the Asian nation positively.
Implications For Japan’s Crypto Market
Japan’s move to embrace cryptocurrency as a legitimate investment avenue for startups is poised to significantly impact its digital currency landscape. Primarily, these measures aim to increase user adoption of cryptocurrency by broadening the pool of potential investors ready to inject funds into the sector.
Accordingly, this broader reach will attract diverse stakeholders, including individual investors and cryptocurrency enthusiasts, and advance the democratization of startup funding in the country. Furthermore, when startups secure virtual currency investments, they open the door to increased liquidity for the industry.
This newfound financial flexibility also allows them to pursue various strategies, like trading digital assets or deploying them for specific economic use cases. Meanwhile, experts note that this infusion of capital is a powerful factor accelerating these startups’ growth and expansion.
Furthermore, the government’s policy is set to create various opportunities for the sector, including a surge in Japan’s digital currency market. With startups’ increasing demand for funds in crypto assets, the market is poised for a significant upsurge in trading volume and overall market activity.
These changes create fertile ground for existing exchanges to thrive and a breeding ground for emerging new and innovative startups in the digital realm. Observers believe that the government’s decision will shape the trajectory of startups and redefine Japan’s digital currency market.
With more startups seeking crypto-related funds fueled by friendly government policies, an inherent spillover effect is bound to happen throughout the financial sector. Ultimately, this surge in demand will pave the way for a significant increase in trading activity, creating an environment conducive to the expansion and evolution of established crypto firms and the birth of new ones.
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