Bitcoin

Japan’s Regulatory Shift: Start-ups Granted Permission To Raise Funds With Crypto Instead Of Stocks

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In a significant development for the crypto industry, the Japanese government has recently announced a noteworthy relaxation of regulations about startup funding. This development explicitly allows startups to accept digital assets as an alternative to traditional stocks.

According to a Japanese media outlet report, this regulatory shift aims to foster a more supportive and inclusive environment for startups by diversifying their financing options and aligning Japan with international standards in handling digital currencies.

Paving The Way For Crypto-Backed Startups?

Under the newly established system, startups will now have the opportunity to receive investments in the form of crypto through a fund called the Investment Business Limited Liability Union (LPS). Per the report, the LPS fund consists of multiple benches dedicated to investing in securities issued by startups.

This recent development follows the approach taken by Japan’s primary financial regulatory authority, the Financial Services Agency (FSA), which sought to amend the tax code related to digital currencies on August 31. 

The FSA’s proposal focuses on exempting domestic companies from the current “unrealized gains” tax on cryptocurrencies, which is typically imposed at the end of each fiscal year. Under the existing system, Japanese legal entities are subject to annual taxes on their digital assets holdings, regardless of whether these assets are sold or converted into traditional fiat currency. 

The FSA’s amendment aims to bring Japan in line with other countries where taxes on crypto assets are only applicable when converted into fiat currency. 

By exempting companies from the “unrealized gains” tax, the FSA seeks to create a favorable environment for fostering Web3 technologies and encouraging startups that leverage blockchain technology.

Notably, the proposal has garnered support from the Ministry of Economy, Trade, and Industry, strengthening its chances of acceptance. 

If implemented, this reform could have significant implications for the Japanese digital market, boosting startups and encouraging innovation in the blockchain sector.

Japanese Crypto Ecosystem Set To Flourish?

The decision to embrace crypto as a legitimate form of investment for startups is expected to have significant implications for the digital currency market in Japan. 

Firstly, these measures could increase accessibility by expanding the pool of potential investors. This broader accessibility may attract a more comprehensive range of stakeholders, including individual investors and cryptocurrency enthusiasts, promoting greater startup funding democratization.

Additionally, startups receiving crypto investments could be poised to enjoy enhanced liquidity. They will have the flexibility to trade or utilize these assets for various purposes, providing them with additional capital for growth and expansion.

Moreover, the government’s decision will likely stimulate the growth of the digital currency market in Japan. The increased demand for cryptocurrencies from startup investments could lead to a surge in trading volume and market activity. This, in turn, presents opportunities for existing exchanges and fosters the emergence of new platforms.

Crypto
The total crypto market cap continues with its accumulation phase on the daily chart. Source: TOTAL on TradingView.com

Featured image from iStock, chart from TradingView.com

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