Japan will allow startups to raise venture capital through digital assets

Author: Sebastian Sinclair, Blockworks; Compiler: Songxue, Golden Finance

** Japan is preparing to allow startups to raise new funds from venture capital firms by selling digital assets. **

The Japanese government’s plan is expected to be submitted to parliament as early as next year, Nikkei reported on Friday. **

Traditionally, Japan’s venture capital environment has been more conservative, with tighter regulations and a more risk-averse investment scene than more aggressive markets like Silicon Valley.

Limited partnerships are a common vehicle for Japanese venture capital, often limited to more traditional assets.

The new rules will add digital assets to the list of investment avenues available to companies looking to invest in emerging crypto startups, including stock options and securities.

The importance of venture capital in Japan’s corporate world has been growing for years and is expected to further expand its influence in capital markets and public discourse.

According to data provided by Pitchbook, the average financing size increased by more than 390% year-on-year, from US$65 million in 2022 to US$321 million.

This comes after the Japanese government pledged late last year to promote further investment in start-ups and other economic sectors to “centralize” human capital and funds.

Japan is the world’s third-largest economy and is considered to have a mature and more strictly regulated cryptocurrency market than most other Asian countries.

Japan’s latest tightening of rules is seen as a direct response to criticism it faced two years ago for failing to catch up with other countries in implementing digital asset rules.

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

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

Japan also introduced new cryptocurrency anti-money laundering rules in June, requiring individuals and companies to trace the origin of specific assets and identify senders and recipients.

In March last year, the country introduced amendments to its Foreign Exchange Law aimed at restricting alleged crypto transactions with sanctioned Russian individuals.