Japan to let startups raise VC funding via digital assets: Nikkei

The proposed regulation would include digital assets among the existing investment options for VC firms targeting emerging crypto startups

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Japan is reportedly preparing to allow startups to raise fresh funding from venture capital firms through the sale of digital assets.

According to a report by Nikkei on Friday, the plan from the Japanese government is expected to be submitted to parliament as early as next year. Blockworks has reached out for further confirmation.

Traditionally, the VC environment in Japan has been seen as conservative compared to more aggressive markets like Silicon Valley. Regulations have been viewed as stringent and the investment scene risk-averse. 

Limited partnerships, the common vehicle for VC investment in Japan, are generally restricted to more conventional assets. 

The new rule would add digital assets to a list of investment avenues available to those firms looking to put money into budding crypto startups, including stock options and securities.

The significance of venture capital in Japan’s corporate landscape has been growing for several years and is projected to further amplify its presence in both capital markets and public discourse. 

According to data provided by Pitchbook, the average funding size has jumped more than 390% year over year, from $65 million in 2022 to $321 million.

The development follows a pledge by the Japanese government late last year to promote further investment into startups and other sectors of its economy in a bid to “concentrate” its human capital and money.

Japan, the world’s third-largest economy, is considered to have a mature and tougher regulatory market for crypto than most other Asia counterparts. 

Its tightening of the rules in recent times is seen as a direct response to criticism levied against Japan two years ago for failing to play catchup to other nations implementing rules against digital assets.

In June, the nation passed an investor protection bill aimed at establishing a legal framework for stablecoins, defining them as assets pegged to fiat currencies. 

The regulation was a direct response to fallout resulting from the implosion of the Terra ecosystem, whose algorithmic stablecoin UST wiped more than $40 billion from the market.

Japan also ushered in new anti-money-laundering rules for crypto in June, requiring individuals and companies to track a given asset’s provenance as well as identify the sender and receiver. 

In March of last year, the nation pursued amendments to its Foreign Exchange Act with the aim of restricting crypto transactions suspected of reaching sanctioned Russian individuals.


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