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Japan has been very proactive toward cryptocurrency, as the country recognized its prospective benefit from digital currencies and blockchain technology. With conservative estimates tipping it, it is considered to be one of the global leaders in the space. Japan boasts an early adoption history, coupled with a regulatory environment that is innovative yet protective of consumers.
The strategic acceptance of Web3 technologies by the country and the crafting of clear guidelines on stablecoins, NFTs, and DAOs set the ball rolling for an online roadmap toward a secure and functioning digital economy.
This article reiterates a perspective on the actions of the Japanese government and a perspective on the crypto-assets regulatory oversight that is ruling the roost, identifies central players who are shaping this dynamic space, and covers the main players shaping this evolving space.
The Japanese government has also somewhat been very aggressive on the digital currencies front. For example, in February 2024, a landmark announcement was made by the Ministry of Economy, Trade, and Industry that allowed local investment limited partnerships to invest or hold cryptocurrencies.
The notice represented a revision to the Act on Strengthening Industrial Competitiveness through supporting start-ups and businesses domestically that are said to have claims in the blockchain area. A government white paper from April 2023 outlines strategies to revive the local crypto industry, changing to a friendlier environment by easing bureaucratic procedures for Web3 projects involved in NFTs and DAOs.
The regulatory scenario in Japan regarding cryptocurrencies is pretty well-defined. The Payment Services Act defines cryptocurrencies as "crypto-assets," thereby legal tender within the country. This legislation does not impede ownership and investment in crypto-assets. Significantly, in 2022, with the so-called "crypto Travel Rule," the Financial Services Agency has stepped up efforts against money laundering, setting more rigorous AML requirements for each crypto transaction to strengthen the government's supervision over digital asset transfer and, therefore, make potential cases of illicit activities effectively forestalled.
More recently, an "Amendment Act" of June 2022 had further added new provisions aimed at stable coins, hence rendering more stability in the crypto market.
According to the report, the cryptocurrency market in Japan is set to increase to US$141 million by 2028 from US$67 million in 2023 at a CAGR of 18.36%. This kind of optimism shapes potential forms for the supposed role cryptocurrencies can play in setting Japan on the course of definite leadership within the digital economy.
The Japanese financial sector keeps a close eye on the cryptocurrency market. Major regulatory bodies driving responsible cryptocurrency adoption include the Financial Services Agency and the Japan Financial Intelligence Center. There are also a few of importance that keep the sector in compliance. These include the Japan Virtual Currency Exchange Association, Japan Security Token Offering Association, Japan's Crypto Association, and Asia Web3 Alliance Japan. These associations also collaborate in setting up and policing industry standards and best practices.
Investment activities have increased in the Japanese cryptocurrency market lately. In February 2024, Circle and Coincheck joined forces to expand access to USD Coin in Japan. After the integration, the users of Coincheck will be enabled to trade USDC against other digital assets, radically boosting liquidity and chances of reaching mainstream adoption for USDC on the Japanese market.
Another notable development was the strategic partnership between Komainu, a digital asset custodian, backed by Nomura, Japan's largest investment bank, and Crypto Garage; this happened as far back as November 2023. The objective of such a joint venture had been to implement resilient infrastructure so that more institutional players would participate with much ease and security within the space. All of this is most likely to birth further confidence and participation from institutional players in Japan.
Moreover, it was a policy change, in September 2023, allowing startups to be able to issue funds with digital assets instead of traditional stock through venture capital firms. This had been one way of lifting blockchain-related business in Japan. Without forgetting to mention, the buyout of one of the largest Japanese cryptocurrency exchanges, SEBC, by Kakao Piccoma, in April 2022, marked a milestone for Kakao's global blockchain expansion strategy.
Businesses that control the Japanese cryptocurrency market include major players such as BitFlyer, Ekoios Technology, BTCBox, Emurgo, BitBank, Chaintope, QBurst, Soramitsu, Titan Technology Corporation, and BitArg. Their services range from cryptocurrency exchanges through custodial solutions to blockchain development expertise.
The crypto market of Japan is blessed with a friendly regime in terms of regulation and proactive government initiatives to create a setup conducive to innovation and investments from locals and foreigners alike. Provided continuous regulation-related advancements and the current and future actions taken by the key cryptocurrency market participants, Japan stands ready to hold its lead on the world cryptocurrency landscape.
