Jai Sahu
Japan might ease the rules for venture capital (VC) firms investing in cryptocurrency, with the government considering allowing them to back Web3 companies.
According to an announcement from the Ministry of Economy, Trade, and Industry, and reported by CoinPost, the cabinet has green-lit a proposal that could enable VCs to possess cryptocurrency.
VC Crypto Investment: Japan’s Bold Step Forward?
The government is looking to amend regulations related to Limited Partnership Funds (LPS). These funds usually invest in private companies and emerging startups.
LPS entities are regulated under the 1998 Limited Partnership Act. Previously, the ministry had expressed intentions to permit LPS managers to invest in security tokens.
At that time, it was clear that direct crypto holdings by LPS were off the table. But, the latest statement indicates a shift, suggesting the government is now open to easing these restrictions.
CoinPost reported that the cabinet is “set to include cryptocurrencies in the list of assets LPS can acquire and keep.”
This change could drastically alter how Web3 companies secure funding in Japan. Currently, these startups are limited to offering VCs equity, as cryptocurrencies are not an option due to legal constraints.
Hiro Kunimitsu, CEO of Thirdverse, highlighted on X that Web3 initiatives have been compelled to seek funding from foreign VCs due to these restrictions
素晴らしい〜！！㊗️
これは簡単に解説しますと、これまでの日本のルールだとVCが暗号資産に投資できなかったのです。プロジェクトによっては株式は発行せずに暗号資産の発行だけといのもあります。(AstarやOasyなど)… https://t.co/In6iNagzXm
— 国光宏尚 元gumi (Hiro Kunimitsu) (@hkunimitsu) February 16, 2024
This, the CEO said, throws up a “major barrier to entry.” But Kunimitsu said that the Cabinet decision could provide “a major opportunity” for Japanese Web3 startups. The CEO wrote:
“Japanese VCs could not invest in [cryptoasset-related firms]. Therefore, from the outset, these firms’ projects faced a huge hurdle that involved sourcing finance from overseas VC.”
Japan is officially in recession. How serious is it, and what does it mean for interest rates and the yen? https://t.co/kydAjDaeWJ
— Bloomberg Economics (@economics) February 18, 2024
Crypto Strategy ‘In the Works Since Last Year’
Reports suggest this strategy has been under consideration since September of the previous year, with plans to introduce a legislative bill to parliament within this year.
This bill would require approval from lawmakers to amend VC cryptocurrency investment regulations.
Yet, so far, no crypto-related legislation proposed by the government has been rejected by Japan’s parliament.
On February 7, Kochi city announced its intention to create a virtual metaverse city to draw tourists and promote local products.
Additionally, this month, Japan’s leading financial watchdog urged banks to tighten oversight on crypto transactions to curb potential fraud involving tokens.