MIIX Capital: Japanese Crypto Market Research Report

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密客资本
1 months ago
This article is approximately 6628 words,and reading the entire article takes about 9 minutes
Japans cryptocurrency market presents unique characteristics in terms of regulation, investment, and innovation. From risk aversion to tax policies, efforts are being made to promote the development of the industry. Strict but positive regulation provides a relatively stable environment for entrepreneurs and investors. However, high tax burdens and long approval processes remain the main challenges for the development of the industry.

introduction

In the crypto market, closedness and independence are the inherent impressions of many people about Japan. Many times, its presence is not strong and it is easy for people to overlook it. Compared with other markets in the Asian region, Singapore, Hong Kong and South Korea are more mentioned and paid attention to.

However, as the worlds third largest economy and a country that established the status of cryptocurrency and developed a regulatory framework earlier, Japan has unique advantages and market characteristics. As the government vigorously embraces encryption and promotes the development of the industry, new changes and opportunities are gradually coming.

1. Macroeconomic indicators and current situation

Japan has a strong and well-established financial system, which has laid a solid foundation for the development of blockchain and Web3 technologies in the country. In discussions about the Japanese cryptocurrency market, regulation has become a key focus.

The country maintains strict regulations to preserve investor stability, market security, and overall integrity. While these regulations are intended to protect the industry, they can pose a barrier to entry and expansion for smaller cryptocurrency businesses due to the compliance complexities and large tax burdens associated with cryptocurrency-related earnings. Additionally, lengthy token listing approval processes can lead to the perception of lower market activity.

1.1 Geographical location and population size

Japan is an island nation in East Asia, located in the northwestern Pacific Ocean. It is part of the Ring of Fire and spans an archipelago of 14, 125 islands, of which the five main islands are Hokkaido, Honshu (the mainland), Shikoku, Kyushu, and Okinawa, and there are nearly 4,000 smaller islands. Japan is most closely connected to the Siberian region of Russia, while South Korea and China are located further south. Tokyo is the countrys capital and largest city, followed by Yokohama, Osaka, Nagoya, Sapporo, Fukuoka, Kobe, and Kyoto.

According to United Nations data, Japan has a population of nearly 125 million, of which nearly 122 million are Japanese nationals (2022 estimate), accounting for 98.1% of the countrys population, and the rest are a small number of foreign residents, including the indigenous Ainu, Ryukyuans, Koreans, Chinese, Filipinos, Brazilians who are mostly of Japanese descent, and Peruvians who are mostly of Japanese descent.

Japan is the fastest aging country in the world, with the highest proportion of elderly people of any country, accounting for one-third of its total population, with an accompanying increase in life expectancy and a decline in birth rate. Japans total fertility rate is 1.4, below the replacement rate of 2.1, and is among the lowest in the world; the median age is 48.4, the highest in the world. The Japanese government expects that by 2060 there will be one elderly person for every working-age person. Immigration and fertility incentives are sometimes suggested as solutions to provide younger workers to support the countrys aging population.

1.2 Economic structure and characteristics

Japan is the worlds fourth largest economy, second only to the United States, China and Germany (Germany will surpass Japan to become the third largest economy in 2023). Its economic composition is mainly based on services, manufacturing and import and export businesses. Japans economic characteristics reflect its high degree of industrialization, strong external dependence, and unique economic structure and corporate organizational form:

  • The services sector accounts for about 70% of Japans GDP and is known for wholesale and retail trade, real estate services, and professional, scientific and technical activities;

  • It has a high level of industrialization and is a global leader in electronics and technology, with agriculture not playing a major role;

  • Mainly engaged in processing trade, it imports raw materials and fuels and exports products to explore international markets. It is the worlds fifth largest exporter and fourth largest importer.

  • The industry is mainly distributed in the narrow strip along the Pacific coast and the Seto Inland Sea coast, which is conducive to the import of raw materials and the export of products;

  • Manufacturers, suppliers and distributors are closely integrated to form a strong corporate alliance with close teamwork;

  • Its obvious characteristics are the career promotion system based on qualifications and the lifetime employment system, which also makes it difficult for foreign companies or new companies to enter the Japanese market;

In addition, changes in the population structure have a significant impact on its economy. Japan is facing problems such as a decline in the proportion of the labor force, aging and a declining birth rate. These factors have led to a decline in housing demand, suppressed capital accumulation and lower returns on investment, which in turn have affected economic activities and innovation.

1.3 GDP ranking surpassed by Germany

MIIX Capital: Japanese Crypto Market Research Report

According to a report by Japans Kyodo News on February 15, Japans nominal gross domestic product (GDP) in 2023 was 4.2106 trillion US dollars, lower than Germanys 4.4561 trillion US dollars, falling to fourth place in the world. It is not accidental that Japan has lost its status as the worlds third largest economy, but the inevitable result of its long-term lack of stable growth momentum. In October 2023, the International Monetary Fund (IMF) predicted that Japans nominal GDP would be overtaken by Germany in 2023. Therefore, when the results were officially released, there was no big wave of public opinion or backlash, and Japanese society seemed to have accepted the result calmly.

The long-term lack of stable growth momentum in the Japanese economy is the underlying reason why Japans nominal GDP will be surpassed by Germany in 2023. How to find long-term momentum to promote Japans economic development may have become a top priority for the Japanese government. If the economy continues to be sluggish in the next three to five years, all of this will become a real problem for Japanese society.

1.4 Inflation rate data

MIIX Capital: Japanese Crypto Market Research Report

Japans annual inflation rate fell to 2.7% in March 2024 from a three-month high of 2.8% in February, in line with market expectations. Prices of transportation (2.9% vs 3.0% in February), clothing (2.0% vs 2.6%), furniture and household goods (3.2% vs 5.1%), healthcare (1.5% vs 1.8%), communications (0.2% vs 1.4%), and culture and entertainment (7.2% vs 7.3%) slowed. Meanwhile, inflation rates for food (4.8%), housing (0.6%), education (1.3%) and others (1.1%) remained stable. Meanwhile, prices of fuel and light sources fell the least over the past year (-1.7% vs -3.0%), with the pace of decline slowing in electricity (-1.0% and -2.5%) and natural gas (-7.1% vs -9.4%),

The Bank of Japan ended its negative interest rate policy last month, breaking away from a decade of ultra-loose monetary policy. Markets are looking for clues on when the Bank of Japan will raise rates again. The Bank of Japan said a virtuous cycle of sustained and stable achievement of its 2% price target and strong wage growth was essential for policy normalization.

Meanwhile, the Bank of Japan is focusing on whether service prices will pick up along with wage growth, which is the biggest in 33 years this year, though real wages adjusted for inflation have fallen for two years. An Internal Affairs Ministry official said on Friday that the impact of recent wage increases has not yet been reflected in service prices.

1.5 Legal tender in Japan

MIIX Capital: Japanese Crypto Market Research Report

The Japanese yen (Japanese: 円, Japanese romanization: en, English: Yen), whose banknotes are called Japanese banknotes, is the legal tender of Japan. The Japanese yen is also often used as a reserve currency after the US dollar and the euro. The Japanese yen was created on May 1, 1871. The banknotes issued are 1000, 2000, 5000, and 10000 yen, and the coins are 1, 5, 10, 50, 100, and 500 yen.

What is special is that the issuer of Japanese yen banknotes is the Bank of Japan (Bank of Japan - Japanese Banknotes), and the issuer of Japanese yen coins is the Japanese government (Japan). In addition, Japanese yen coins do not have unlimited legal tender, so in principle, the legal upper limit of the same denomination of coins used in a transaction is 20 pieces (that is, the maximum payment capacity of coins in principle is 1 yen × 20 pieces + 5 yen × 20 pieces + 10 yen × 20 pieces + 50 yen × 20 pieces + 100 yen × 20 pieces + 500 yen × 20 pieces = 13,320 yen), and merchants have the right to refuse to accept the excess amount according to law.

MIIX Capital: Japanese Crypto Market Research Report

While the Fed and other central banks aggressively raised rates in 2022 and 2023 to curb inflation, the Bank of Japan kept rates at zero and continued to print massive amounts of fiat money. In 2023, Japan’s core inflation rate rose 3.1%, the largest increase since 1982.

Inflation erodes the purchasing power of fiat currencies and drives investors to put money into alternative assets like Bitcoin and gold that are attractive stores of value. Unless the Bank of Japan accelerates its planned exit from ultra-easy monetary policy, the dollar will continue to appreciate against the yen, making it more attractive relative to other assets.

2. Current status and characteristics of the crypto market

Japan has been actively cultivating the web3 industry. The government has released a web3 white paper, reformed taxes, and attracted investment. The Japanese government has also announced a five-year startup development policy, planning to increase the number of Japanese startups to 100,000 within five years and invest approximately 10 trillion yen to create 100 unicorn companies.

2.1 The government strongly supports the development of blockchain

The Web3 project team of the ruling party of Japan released a white paper on April 6, 2023, regarding Web3 as a national strategy. To this end, the Japanese government has invested a lot of resources in promoting the research and application of blockchain technology. For example, the Cabinet Office of Japan has established several special funds to support the innovation and practical application of blockchain technology. In addition, the Japanese government is also actively promoting international cooperation and communicating and cooperating with other countries in the formulation of standards and the construction of regulatory frameworks for blockchain technology.

Japans application of blockchain covers many aspects, such as real estate registration, identity authentication, interbank settlement, Bitcoin insurance, supply chain finance, etc. The following are some specific cases:

  • Real estate registration: The Japanese government plans to integrate the country’s real estate data, approximately 230 million plots and 50 million buildings, into a single blockchain ledger to improve data visualization, accuracy, and security. The project is currently still in the testing phase and is expected to be completed within the next five years.

  • Identity authentication: Japans Financial Services Agency (FSA) has developed a blockchain platform that enables customers to share personal information between multiple banks and financial institutions and use a shared ID to open accounts. In addition, SoftBank Group has partnered with TBCASoft to launch a blockchain-based identity identification and verification project, using zero-knowledge proof and distributed ledger technology to protect personal identity information from theft.

  • Interbank settlement: Fujitsu has partnered with Mizuho Financial Group, Sumitomo Mitsui Financial Group, and Mitsubishi UFJ Financial Group to develop a peer-to-peer remittance service using blockchain, improving the efficiency and security of remittances.

  • Bitcoin insurance: Due to the frequent hacker attacks on Bitcoin exchanges, resulting in customer asset losses, Japans Sumitomo Mitsui Insurance Company and bitflyer have launched a Bitcoin insurance product to provide compensation services for Bitcoin assets and cover losses caused by internal company accidents and improper employee operations.

  • Supply Chain Finance: Mizuho Bank and IBM Japan have jointly developed a blockchain trade finance platform that enables fast and secure exchange of digital transaction documents and supply chain transaction data, and improves the transparency and creditworthiness of all parties involved in the transaction.

2.2 Web2 giants enter the encryption industry

Investment in Japans crypto industry is often led by existing Web2 giants such as securities companies, telecommunications companies, and distributors, rather than venture capitalists (VCs), and there are few local venture capital institutions specializing in web3 investment. Among them, the Japanese Web2 giant SBI Group participates in the crypto industry through joint ventures and subsidiaries:

  • SBI Digital Asset Holdings: Security Token Services

  • SBI VC Trade: Cryptocurrency Trading Service

  • SBINFT: NFT Business

Others who have specialized in the crypto industry through the establishment and development of subsidiaries and joint ventures include:

  • NTT DoCoMo (Japan’s largest telecommunications company): NTT Digital

  • Sony (leader in electronics and entertainment): Sony Network Communications Corporation

  • SoftBank and Line: Z Venture Capital

2.3 GameFi and NFT have high popularity and potential

Due to policy restrictions, Japan cannot directly invest in tokens and issue tokens, which limits the development of DeFi in Japan. Therefore, in Japan, NFT and blockchain games are widely regarded as major players in its cryptocurrency market.

Japan has a globally influential gaming industry and is one of the countries with the highest per capita profit in the gaming market worldwide. Its gaming industry has a long and rich history, providing a solid foundation for the development of crypto games. Japanese players are also known for their willingness to pay for high-quality games, and they have a special liking for games, making Japans blockchain gaming market have huge profit potential.

Japan not only has a rich and long history of video games, but also has the most IP (intellectual property) in the world, including anime, comics, and video games. These cultures have transcended national borders and become globally famous. Because of this, Japans NFT community also has unique aesthetics and preferences, which are different from other parts of the world. Moreover, Japans hot spots are sometimes not synchronized with the world, and there will be a certain degree of mismatch delay. Previously, after the NFT craze in China and the United States passed, Japans various NFTs had a wave of outbreaks.

2.4 The market is easy to defend but difficult to attack and the localization sentiment is obvious

The Japanese market is a relatively independent and closed market. Due to the language barrier (Japanese people have psychological barriers to English) and the cautious tendency of Japanese KOLs, it is difficult for crypto projects to be marketed in Japan. Overall, it is a market that is easy to defend but difficult to attack. Japanese crypto users have a very obvious local sentiment, but because of the malicious harvesting behavior of some local projects, peoples emotions towards local projects have become complicated. Although they still tend to support domestic projects, they obviously lack confidence.

Compared with local projects, local users are not very enthusiastic about foreign projects. Overseas projects need to adapt their products and services to local regulations, translate information into Japanese, cooperate with local KOLs and media, and hold local events. By reaching out to localized audiences, projects can gain more visibility and users.

It is worth noting that Japanese users have a mindset of actively considering the project owners and merchants. For example, when merchants set prices very low, they will think about whether the merchants can recover their costs by doing so. If the crypto project is actively doing things, Japanese users will show a more tolerant and understanding attitude than users in some other markets, which will help create a healthy community atmosphere.

3. Encrypt user features

According to TripleA, more than 5 million people, or 4.0% of Japans total population, currently own cryptocurrencies. This value is verified by data from licensed exchanges. In addition, a KuCoin report in May 2023 showed that approximately 3.8 million cryptocurrency investors in Japan owned or invested in crypto assets in the previous 6 months, accounting for approximately 5% of Japans adult population; in Japan, although BTC and ETH are still the favorite crypto assets for Japanese investors, people are very interested in diversifying into multiple fields, such as NFT, Metaverse, Stablecoins, Public Chains, DeFi, and meme coins.

Male investors account for far more than female investors

Japanese Cryptocurrency Investor Profile and Investment Experience

MIIX Capital: Japanese Crypto Market Research Report

Based on the understanding of various regional markets, men are more interested in cryptocurrency investment. However, this phenomenon is most obvious in the Japanese market, where 80% of investors are men and only 20% are women.

Unlike several other markets, the majority of cryptocurrency investors in Japan are over the age of 30, accounting for 77%. On the other hand, the younger generation between the ages of 18 and 30 only account for 23% of cryptocurrency investors in Japan.

In addition, the maturity of cryptocurrency adoption in Japan is relatively high. Among the investors surveyed, 27% have invested in cryptocurrencies for more than 3 years, 33% have invested in cryptocurrencies for 1-2 years, and only 9% of the respondents are new to crypto assets.

Cryptocurrency investing is also more common among lower-income households, with 44% of investors having a household income of up to 5 million yen per year. However, only 21% of cryptocurrency investors in Japan have an annual income of more than 10 million yen.

Young people believe in the innovation of cryptocurrencies

MIIX Capital: Japanese Crypto Market Research Report

Other major reasons why Japanese investors turn to cryptocurrencies include long-term wealth accumulation (40%) and diversification of investment risk and portfolio (38%). While 28% of investors participate in cryptocurrencies because they think it is fun, 26% of investors believe it can make them rich overnight. Only 21% of Japanese cryptocurrency investors believe that crypto assets are a means of preserving value against inflation.

Among them, 44% of investors believe that investing in cryptocurrencies can grasp the future. The largest group in this category is investors aged 18 to 30, who invest in cryptocurrencies because they believe in their cutting-edge technology and potential for financial innovation.

The overall transaction frequency is low, especially for investors over 40 years old

MIIX Capital: Japanese Crypto Market Research Report

The frequency of transactions is strongly correlated with age. Young investors aged 18-30 are the most active, trading every week. Users aged 40-60 trade once a month on average. There is no obvious pattern among users aged 31-39, with transactions occurring once a week, multiple times a week, and multiple times a month.

Investors over 40 prefer BTC and ETH

MIIX Capital: Japanese Crypto Market Research Report

As in other regional markets, BTC and ETH account for the highest proportion of Japanese users’ portfolios, covering all age groups. In particular, investors between the ages of 40 and 60 are most interested in these cryptocurrencies, with 80% of investors expressing interest in Bitcoin and 43% in Ethereum.

Other popular categories favored by Japanese investors include: NFT (27%), Metaverse (24%), stablecoins (16%), and public chain projects (15%);

In addition, GameFi (11%), DeFi (8%) and Meme Coin (8%) are also gradually becoming the crypto investment options for Japanese users;

Social media is the main channel for people to learn about cryptocurrencies

MIIX Capital: Japanese Crypto Market Research Report

Most Japanese investors learn about cryptocurrencies through social media and KOLs, and this trend is highest among younger groups, with 41% of investors aged 18-30 relying on influencers to learn about cryptocurrency investments.

Social media that people trust and use include: YouTube (32%), Twitter (23%), Line (15%), Instagram (13%) and TikTok (9%). From the data, we can see that more technical social channels such as Discord, Telegram and Reddit are not trusted by Japanese users, who believe that these channels are more risky.

4. Current status of CEX in Japan

According to local regulators, cryptocurrency exchanges need to obtain a license from the Japan Financial Services Agency (JFSA). Most licensed cryptocurrency exchanges are registered in Tokyo or Osaka.

Binance Japan is known for its diverse token types

MIIX Capital: Japanese Crypto Market Research Report

Binance Japan was launched in August 2023 and was renamed after Binance acquired the local licensed CEX Sakura Exchange Bitcoin in November 2022. The move marks Binances return to the Japanese market after the countrys financial regulator warned it again in 2021 that it was operating without a license. Currently, Binance Japan is known for its rich and diverse token types and is loved by many users.

Bybit fully meets the preferences of Japanese investors

MIIX Capital: Japanese Crypto Market Research Report

Bybit facilitates seamless entry into cryptocurrency trading with a secure platform that hosts over 1,000 cryptocurrencies and complies with Japan’s strict regulations. It offers direct local yen deposit options including bank transfer, JCB card, and Line Pay, simplifying access to investment.

Bybit’s competitive advantages include low trading fees (starting at 0.01% for market makers and 0.06% for takers), ample liquidity, daily trading volume of over $30 billion, and a vibrant community of over 20 million users, which confirms its market-leading position.

Coincheck has a user-friendly interface and no transaction fees

MIIX Capital: Japanese Crypto Market Research Report

Founded in 2014, Coincheck is Japan’s largest cryptocurrency exchange with more than 2.5 million users. In 2018, it was acquired by Monex Group, a Japanese financial services company founded in 1999 that operates a diverse business including online brokerage, asset management and cryptocurrency services.

Coincheck provides a variety of cryptocurrency trading services, attracting a large number of local and international users. With its user-friendly interface and no transaction fees, Coincheck has become one of the most popular trading platforms in Japan.

Bitflyer’s Advanced Trading Tools Are Popular

MIIX Capital: Japanese Crypto Market Research Report

Bitflyer is well-known for its advanced trading tools and features, and ranks first in the country in terms of Bitcoin trading volume. It cleverly caters to different user groups, from novice to experienced traders, by offering two tailored trading experiences: the intuitive bitFlyer Exchange for beginners and the advanced BitFlyer Lightning for more complex trading strategies.

BitFlyer has broadened its appeal through innovative features, including a unique crypto credit card, the opportunity to earn BTC, and a Bitcoin T-Point exchange. These initiatives have solidified bitFlyer’s reputation as Japan’s third-ranked cryptocurrency exchange, balancing accessibility and depth for a broad range of investors.

Bitbank has the highest rating in the App Store

MIIX Capital: Japanese Crypto Market Research Report

Bitbank is the highest-rated cryptocurrency trading app in the Japanese Apple App Store and one of the few digital asset exchanges in Japan that offers instant account verification, which is usually completed within a few minutes.

In addition to trading functions, Bitbank also provides lending services, allowing users to lease assets to Bitbank with a return rate of up to 3%. Third-party institutions have highly praised Bitbanks security performance. The platform uses offline cold wallets and Multisig technology to ensure resistance to hacker attacks and protect users asset security with advanced technology.

Zaif is known for privacy and security

MIIX Capital: Japanese Crypto Market Research Report

Zaif has over 500,000 users. Founded in 2014, the platform offers a wide range of cryptocurrencies such as Bitcoin, Ethereum, and others. Known for its focus on privacy and security, Zaif attracts traders who prioritize these features.

It allows users to buy and sell various cryptocurrencies with Japanese yen, and also allows margin trading, which is suitable for beginners and those who want to trade quickly. Since its inception, Zaif has been in a process of continuous development, and it has added some new features such as trading, payment services and currency reserves.

5. Web3 projects in Japan

The variety of project types in the Japanese crypto market is relatively low. Although there are public chain and DeFi projects, they are mainly non-fungible tokens (NFTs) and gaming projects. These projects are largely focused on localization and long-term community building.

Japan Open Chain

MIIX Capital: Japanese Crypto Market Research Report

Japan Open Chain (JOC) is a utility-focused Ethereum-compatible Layer 1 public chain that works with trusted enterprises to provide reliable blockchain infrastructure for enterprises and local governments. Japan Open Chain is a blockchain infrastructure operated by Japanese companies that complies with Japanese law and provides a secure environment for developing web3 businesses.

INTMAX

MIIX Capital: Japanese Crypto Market Research Report

INTMAX is a new type of zkRollup as an Ethereum L2 network for a variety of web services and finance. It will enable Ethereum to enable all online citizens to participate in the economy through payment infrastructure and Internet-native ownership using NFTs and community-managed tokens. NTMAX has made significant innovations in ZK implementation, making it a unique Layer 2 rolling network with low cost, security, adjustable privacy, and, most importantly, scalability.

HashPalette

MIIX Capital: Japanese Crypto Market Research Report

Palette is a blockchain network for issuing, managing, and distributing digital items. Users can freely transfer ownership of digital items and use them in applications. Palette allows digital items to be processed as NFTs on its own blockchain, Palette Chain. Palette Chain is a blockchain designed specifically for the issuance, management, and distribution of digital items in the entertainment sector, and is designed to accommodate business models. In addition, Palette Chain can be connected to multiple blockchains, including Ethereum, and can serve as a cross-chain platform, serving as a hub for NFT issuance and distribution.

Hashport

MIIX Capital: Japanese Crypto Market Research Report

HashPort is a cross-chain interoperability layer that supports fast and secure cross-network transfer of digital assets. It is developed and provided by the eponymous HashPort Co., Ltd., which was established in 2018 with the vision of asset digitization and provides blockchain technology consulting and solution services to customers.

KEKKAI

MIIX Capital: Japanese Crypto Market Research Report

KEKKAI is a Web3.0 security plug-in that detects dangers by analyzing transaction simulations, aiming to eliminate fraud in the growing Web3 field. If users use KEKKAI, they can obtain the risk judgment information it provides in transactions - if there is any abnormality, KEKKAI will display a risk warning on the page.

Murakami Flowers

MIIX Capital: Japanese Crypto Market Research Report

Takashi Murakami is a renowned Japanese artist known for his colorful works and unique artistic style. The Murakami.Flowers project (MF for short) initiated by him is a comprehensive project covering art, design and digital creation. The project is centered on the number 108 (composed of 108 backgrounds and 108 small flowers), which echoes the number related to the afflictions or worldly temptations in Buddhism, meaning that the artist attempts to transcend worldly constraints through digital art.

Crypto Ninja Partners

MIIX Capital: Japanese Crypto Market Research Report

Crypto Ninja Partners (CNP) is a Japanese ninja-themed NFT series that originally originated from a community called NinjaDAO. Although NinjaDAO is not a DAO organization in the strict sense, this community brings together many cryptocurrency enthusiasts from Japan. Two core figures, Ikehaya (Japanese NFT KOL and Web Marketer) and Road (another core contributor), jointly promoted the development of CNP.

MetaSamurai

MIIX Capital: Japanese Crypto Market Research Report

The vision of the project is to establish a digital fashion brand and empower creators. The core concept of the project is I GOT YOUR BACK, which symbolizes MetaSamurais commitment to supporting its NFT holders. The phrase I GOT YOUR BACK originated from a story about two people standing back to back in battle, protecting each other; the spirit of a samurai is to resolutely dedicate himself to protecting the lord; the loyal dog Hachiko has been waiting for his deceased master for more than ten years. These are the inspirations for MetaSamurais works.

6. Japanese Crypto Venture Capital

Skyland Ventures

MIIX Capital: Japanese Crypto Market Research Report

Skyland Ventures (SV) is a venture capital (VC) fund based in Shibuya, Tokyo, focusing on seed-stage startup investments. As of 2022, it has invested in over 120 startups, mainly in Japan. Starting in 2022, the fund will target equity/token investments in startups in the Web3 space (cryptocurrency, NFT, and blockchain). The fund ranges from pre-seed stage investments of approximately $50,000 to $500,000 to seed and higher stage investments ranging from $100,000 to $1,000,000. Its founders are Max Kinoshita, Yonkuro Masanori Ikeda, and Yuan Xiaohang.

They are working with Hash Global, OKX Ventures, Foresight Ventures, MH Ventures, and Generative Ventures, among others.

Investment History:

  • In 2012, it raised $4 million in venture funds for seed startups.

  • Invested in 16 companies.

  • Trasnlimit (provides BrainWars brain battle game, 13 million installs worldwide, supported by LINE and Braindots, 23 million total downloads)

  • Hachimenroppi (offers a fresh food market powered by Recruit and Yahoo! Japan)

  • Kaumo.jp / Curazay.com (targeting popular websites in Japan with 4-5 million unique visitors)

Gumi Cryptos

MIIX Capital: Japanese Crypto Market Research Report

The venture capital firm is a boutique early-stage venture capital firm based in Silicon Valley, with investments in areas such as information technology, financial services, gaming, insurance, infrastructure, cryptocurrency, cybersecurity, blockchain and fintech, and in the United States, Canada, Europe, Israel, East Asia, South Asia and Southeast Asia, including Japan. Its co-founder is Zirui Zhang, and its managing partners are from Japan and China.

Some of the major investments include OpenSea, 1inch, and Lit.

CGV Fund

MIIX Capital: Japanese Crypto Market Research Report

CGV is an Asia-based fund management company that focuses on investments in crypto funds and crypto studios. CGV FoF consists of family funds in Japan, South Korea, mainland China and Taiwan, with headquarters in Japan and branches in Singapore and Canada. The founders are Steve Chiu and Kevin Ren.

They work with Waterdrip Capital, LK Venture, ZC Capital, Satoshi Lab, and Blockchain Founders Fund, among others.

Some of the projects in their portfolio include AlchemyPay, Bitkeep, Metis, TheGraph, Avalon, and Celestia, as well as more recent Bitcoin ecosystem projects — Bitcoin wallet infrastructure UniSat, bitSmiley, and BTC second-layer network ZULU.

BDASH Ventures

MIIX Capital: Japanese Crypto Market Research Report

BDASH Ventures is a venture capital firm based in Tokyo, Japan, investing in seed, early, and late-stage startups that will be at the heart of next-generation technology. The companys CEO is Hiroyuki Watanabe.

B Dash Ventures hosts a biannual summit for senior tech industry executives and startup founders called B Dash Camp. It is now one of the largest invitation-only tech events in Japan, attracting more than 700 guests from inside and outside Japan.

GMO AI Web3

MIIX Capital: Japanese Crypto Market Research Report

The crypto venture capital fund is part of GMO Internet Group Inc., which is listed on the Tokyo Stock Exchange. Also part of the group is GMO Coin, a licensed cryptocurrency exchange in Japan that lists 28 cryptocurrencies.

MZ Web3 Fund

MIIX Capital: Japanese Crypto Market Research Report

MZ Web3 Fund was founded by Yusaku Maezawa, who is known as the Japanese Musk. It focuses on Web3 project investment and is the most active crypto fund in Japan. MZ Web3 Fund has invested in 24 start-up projects in the Web3 field, including the decentralized storage project SINSO, payment tools Slash and Transak, development community WEB3 DEV, game public chain Oasys, and Web3 user growth platform Aki Network. MZ Web3 Fund will provide the invested projects with the community resources of MZ Club and MZ DAO to help them quickly expand in the Japanese market.

7. Crypto Market Regulation in Japan

In the global crypto market, Japan is a unique market, especially in the financial and investment fields, with great potential. However, due to the frequent hacker attacks in the early days of the crypto market, the Japanese government has a conservative attitude towards the crypto industry and regulates it cautiously. On the other hand, Japans strong sense of crisis has led the authorities to try to use emerging technologies such as blockchain to maintain its position as the worlds third largest economy. Japans blockchain industry regulatory policy has shown mature and stable characteristics, making the blockchain entrepreneurial atmosphere very good.

7.1 Legal status of cryptocurrencies

In 2016, the Japanese Cabinet passed an amendment to the Funds Settlement Act, which came into effect in April 2017. It defined cryptocurrencies in law and recognized their legitimacy. Under the Funds Settlement Act, digital currencies are considered digital currencies if they meet all of the following requirements:

  • The value of property recorded electronically on an electronic device or other item;

  • Using electronic information processing organizations can transfer;

  • It is not an asset denominated in domestic currency, foreign currency, etc.;

  • It can be used by unspecified persons when purchasing or renting goods or receiving services;

  • Can buy and sell to unspecified people;

In other words, Japan recognizes cryptocurrency as a legal means of payment. The Funds Settlement Act is the worlds first bill to include digital currency in the legal regulatory system, which is of great significance to the digital currency market.

7.2 Taxation Policy of Cryptocurrency

In January 2022, Japans ruling Liberal Democratic Party established the Digital Society Promotion Headquarters, and at the same time the Japanese government launched the National Strategy. Since then, its Web3 project team has been making legislative and regulatory reform proposals directly to the ruling party. Many of these reforms have been adopted, but others are still pending.

In terms of corporate taxation, in order to promote a token financing-friendly environment for companies, the Japanese Web3 policy team proposed two reforms. First, exempt tokens continuously held by the issuing company from corporate income tax calculated at year-end market value; second, exempt tokens issued by other companies and held by third parties that are not for short-term trading purposes. The first reform takes effect in June 2023, and the second reform has just been proposed by the FSA for inclusion in the 2024 legislative agenda and approved by the Ministry of Economy, Trade and Industry (METI). Taking these two measures could alleviate the long-standing disadvantage that domestic corporate investors in Japan have been at compared to overseas investors who can rely on more favorable tax treatment.

In terms of personal taxation, income from crypto asset transactions is taxed as miscellaneous income, and when income tax and resident tax are combined, its minimum tax rate is 55%. Moreover, this tax is levied not only when the crypto assets held are converted into fiat currency, but also when they are converted into other crypto assets, resulting in a large outflow of taxpayers and hindering taxpayers from filing taxes. The Web3 policy team proposed four reforms. First, a uniform 20% tax is levied on crypto asset transactions; second, gains and losses are taxed only when converted to fiat currency, thereby exempting exchanges of crypto assets from taxation; third, individuals are allowed to carry forward losses for up to three years; fourth, the same tax rate is applied to crypto asset derivative transactions. But these reforms were excluded from the 2023 agenda, and it is unclear whether these proposals will become part of the 2024 legislative agenda.

7.3 Exchange licensing system and self-regulatory organization

According to the amendment to the Funds Settlement Act, institutions engaged in cryptocurrency trading need to apply for a license from the Japanese Financial Services Agency and accept its supervision. If you engage in digital currency exchanges in Japan, generally speaking, you need to meet the following four basic conditions:

  • Entity: A company or a foreign digital currency trading institution (with a place of business in Japan and a representative in Japan);

  • Registered capital: With property basis, registered capital of more than 10 million yen, and positive net assets;

  • Company system: A company system that can properly and accurately execute business (such as isolating user assets from company assets, establishing an effective risk management system, and preventing risks such as hacker attacks, system failures, money laundering, and terrorist financing);

  • Compliance: comply with relevant laws and regulations, protect user privacy, fulfill anti-money laundering obligations, and cooperate with the Financial Services Departments inspections and investigations;

All tokens listed on compliant exchanges in Japan need to be approved by the Japan Virtual Currency Exchange Association (JVCEA), and this period is at least 6 months to a year, which also makes the Japanese crypto market lack vitality.

In addition to the supervision of the Financial Services Agency, in order to improve the credibility and transparency of the industry, protect the interests of investors, and promote the healthy development of the cryptocurrency market, Japan established the Japan Virtual Currency Exchange Association (JVCEA) in April 2018 with the approval and authorization of the Financial Services Agency to conduct self-regulation. The association has formulated a series of self-regulatory rules and guidelines, including:

  • Categorize and manage the cryptocurrencies provided by the exchange and determine their listing conditions based on factors such as security, liquidity, and transparency;

  • Conduct risk assessment on exchanges, set leverage limits, margin ratios, forced liquidation mechanisms, etc.;

  • Disclose information to exchanges, requiring them to disclose trading rules, fee standards, customer complaint handling methods, etc.;

  • Conduct consumer education on exchanges to improve their knowledge and risk awareness of digital currencies;

7.4 Rules for Issuance and Financing of Cryptocurrencies

In September 2019, the JVCEA issued the Rules on New Coin Offerings and supporting guidelines, allowing the public issuance and sale of tokens for financing (IEO and ICO). This is the first time that Japan has established a clear regulatory framework for cryptocurrency issuance and financing. According to the rules and guidelines, if you want to issue and sell tokens in compliance in Japan, you mainly need to meet the following conditions:

  • The issuer or underwriter must be a licensed exchange and report relevant matters to the Financial Services Department and the Association;

  • The issuance of tokens must comply with the security, liquidity, transparency and other standards set by the association and pass the associations review;

  • The issuance of tokens must have a reasonable pricing mechanism and fully disclose relevant information to consumers;

  • All issued tokens must be sold within a certain period of time and the sales status must be reported to the association;

Currently, under the Rules on the Issuance of New Coins, the frequency of ICO/IEO in Japan is not high. On September 26, 2023, in order to better improve the situation of IEO, JVCEA further released an initial proposal on the direction of IEO reform.

In summary, Japan is a country that is open and positive about blockchain technology and digital currency. It has formulated relatively complete and clear regulations in terms of laws, taxes, licenses, self-discipline, etc., and is still constantly exploring and innovating to adapt to the rapid changes and diversified application scenarios of blockchain technology, and attempts to gain a foothold in the development of the global blockchain industry. For blockchain entrepreneurs, although Japan has a strong localization sentiment, it is still a good soil for the crypto industry to gain a foothold and develop.

8. Summary

As early as 2017, Japan officially recognized BTC as legal tender, and in April 2023, the ruling partys Web3 project team released a white paper, indicating that the governments investment in the industry is increasing, making Japans crypto market increasingly prosperous. However, restrictions such as prohibiting direct investment in tokens and the inability to launch token issuance projects within Japan have restricted the development of DeFi-type projects and businesses in Japan, and instead formed an industry feature centered on NFT and games.

In terms of compliance, Japan has strict laws and regulations in the crypto field in order to ensure the stability of the investment market and the safety of investors assets. However, the high cost of compliance and high tax burden have hindered the entry and development of projects. In particular, the lengthy approval process for token listings often makes people think that the market lacks vitality and loses confidence in this field. It also limits the innovation of enterprises and the flexibility of the market, causing Japans cryptocurrency industry to lag behind other countries.

With the penetration and development of the crypto industry around the world, Japanese institutional investors have also shown great interest in the crypto market and have a clearer understanding of the potential of this industry. The participation of institutional investors has brought more liquidity, stability and credibility to the Japanese crypto market, which is promoting the development of the Japanese crypto industry and attracting more interest from retail and institutional investors.

In the regional competition in the crypto market, Japan has unique advantages in regulatory compliance, GameFi and NFT, and its strong and sustainable community is also an indispensable tool for the development of the industry. However, overly stringent tax policies and investment and financing restrictions still pose a strong obstacle to the rise and development of the crypto industry in the country. If the policy level can be moderately open under the premise of regulatory compliance, it will be more conducive to the rooting, innovation and development of the crypto market. In particular, Japans unique cultural characteristics combined with a strong financial system will have the opportunity to make it a global leader in GameFi and NFT, leading the future of the global crypto industry.

Note: All the above opinions are for reference only and are not investment advice. If you disagree, please contact us for correction.

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Original article, author:密客资本。Reprint/Content Collaboration/For Reporting, Please Contact report@odaily.email;Illegal reprinting must be punished by law.

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