Japan allows investment firms to hold digital assets, opening up a new funding route for local Web3 startups.
The Ministry of Economy, Trade and Industry (METI) has approved new legislation to increase strategic domestic investment and promote the growth and expansion of startups and small and medium-sized enterprises.
The bill partially amends four existing laws to expand investment limits for Japanese companies. This includes changes to the law regarding limited partnership agreements, which will now “add cryptocurrency assets to the list of assets that investment limited partnerships (LPs) can acquire and hold.”
LPs in Japan include venture capital firms, private equity firms, real estate investment firms, and related institutions.
Nikkei first reported the amendment back in September, with the local newspaper stating that digital assets would be included in security tokens for fundraising purposes.
The bill has been passed to the National Assembly, and the current session runs until June.
Japan hopes the amendments will increase funding for its technology sector, which has lagged behind rivals for years. In 2022, Japanese startups raised $6.2 billion, half the amount raised by German startups. The UK raised more than $30 billion, while neighboring China raised more than $60 billion.
Japan aims to attract 10 trillion yen (USD 72 billion) in startup funding by 2027. Last year, Prime Minister Fumio Kishida described Web3 as “part of the new capitalism,” in which digital assets will play an important role. Neocapitalism is the Kishida government’s economic model that focused on investing in people, innovation, and new technologies to revitalize the Japanese economy at a time when Germany overtook Japan to become the world’s third-largest economy.
As governments push for the introduction of digital assets, the Financial Services Authority (FSA) is aiming to strengthen regulatory measures. The watchdog recently warned banks to strengthen their AML and KYC measures as fraud involving digital assets remains high.
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