Japan 2023 Web3 Whitepaper: After the Crypto Winter, Japan Could be the First Country to Welcome Spring

Shiozaki Akihisa, a member of the ruling Liberal Democratic Party in Japan, stated after the release of the "Japan 2023 Web3 White Paper": "After the crypto winter, Japan may be the first country to welcome spring." The LDP's Digital Society Promotion Headquarters Web3 Project Team recently published the "Japan 2023 Web3 White Paper," proposing solutions to the current obstacles in the Japanese Web3 industry, with significant progress in areas such as tax system openness and NFT regulations.

Reviving the Glory of Japan's Web3, LDP: JAPAN IS BACK, AGAIN

The Digital Society Promotion Division of Japan's Liberal Democratic Party believes that in the mid-2010s, Japan was a leader in the global cryptocurrency industry. However, it was later thought that the Web3 industry environment in Japan was not as favorable as in other countries, leading to entrepreneurs and investors being forced to leave Japan.

The LDP mentioned that the price drop and the FTX incident rapidly deteriorated the cryptocurrency industry environment, but it is also an opportunity for Japan to showcase the resilience of its industry environment. For example, in the FTX incident, the impact on domestic users was limited as Japan required the separation of assets for its Japanese branch. Industry participants and use cases are increasing, including major financial institutions and major telecommunications companies, as well as regional revitalization led by local governments. The report states, "The crypto winter is the moment to showcase the value of Web3."

Japan's 2023 Web3 Whitepaper

Following Japan's 2022 NFT whitepaper, the LDP Web3 project team released the "2023 Web3 Whitepaper," which will focus on "how to advance business and address pain points in Web3," "developing the Web3 ecosystem," and "observing the progress of last year's NFT whitepaper recommendations." The following are the key points discussed in the whitepaper:

1. International Policy Making - Japan's regulatory resilience has been proven, and discussions will be held at the 2023 G7 forum to explore activities within the framework; maintaining a position of technological neutrality and responsible innovation.
2. Tax Reform - Increasing tax exemption conditions, providing investors with a three-year profit and loss assessment period, and considering separate taxation for derivatives.
3. Review of Opportunity Protection - The Cryptographic Assets Accounting Rules will be introduced by the Business Accounting Standards Committee.
4. DAO (Decentralized Autonomous Organization) - A special law will be enacted based on the Limited Liability Company (LLC) for the establishment of DAOs.
5. Token Review/Issuance/Circulation - Financial bureaus will assist in reviewing overseas token trading listings to increase efficiency; regulations will be established for the issuance and circulation of stablecoins.
6. Consumer Protection: Encouraging and promoting registration by overseas operators.
7. Involvement of Financial Institutions: The government has provided application support to improve approval efficiency, with ongoing improvements planned for the future.
8. NFT Business: Regulations on preventing gambling abuse, establishing rights, and feedback on profits.
9. Diversification of Investment Tools and Plans: Conditions will be made more favorable for funds to invest in startups through cryptocurrency assets.

Japan's 2023 Web3 Whitepaper: Tax-Friendly Policies

One of the most troubling tax issues in the Japanese industry is the high income tax rate of up to 55% on token appreciation. In this year's tax reform, holding tokens issued by one's own company will be exempted, and holding tokens issued by other companies may also be exempt from taxation if there is no "short-term trading purpose."

In response to the loss of investors, the Japan 2023 Web3 Whitepaper suggests that investors can self-assess their profits and losses related to cryptocurrency assets. Starting from 2024, profits and losses over a period of 1 to 3 years can be calculated. The buying and selling of derivatives are also discussing adopting separate taxation to prevent mixing with other income. Token exchanges between investors are not taxed, and only when exchanged for fiat currency will they be included in taxable income.

Japan's 2023 Web3 Whitepaper: Institutionalizing the NFT Industry

The Japan 2023 Web3 Whitepaper also outlines further plans for the NFT industry.

Japan is concerned about the use of NFTs by sports groups and related businesses for gambling applications. Policies are being reviewed for the adoption of NFTs in "fantasy sports games" to prevent potential gambling issues. Commercial types of NFTs similar to NBA Top Shot may also have gambling characteristics, and if overseas operators offer services to domestic consumers, they should be included in regulatory discussions.

Regarding Japan's rich content copyrights, when issuing NFTs and granting related rights, as well as protecting content copyrights, the government also hopes to have more awareness and corresponding reviews.

In addition, appropriate rules are to be set for revenue sharing related to NFTs, such as for NFT holders or athletes and sports companies issuing NFTs.

Anti-money laundering and anti-terrorism financing regulations based on NFTs are also included in the whitepaper.

The Japan 2023 Web3 Whitepaper states that in response to last year's 2022 NFT whitepaper, the government has set up consultation windows to provide interested businesses with commercial and regulatory opinions; open funds for investment in blockchain technology-related businesses; cultivate and recruit blockchain engineering talents domestically and internationally; and regulate businesses through guidance issued by the self-regulatory association JCBA on NFT copyright and consumer protection.