CGV Research: Advancements in Business Innovation and Global Cooperation Could Enhance Japan’s Web3 Environment 

Research team from CGV FoF , an Asia-centric fund that concentrates on cryptocurrency, has introduced a report titled 'The Lost Three Decades’ as a Lesson: Japan’s Web3 Industry Must Guard Against Similar Pitfalls,' analyzing the Web3 framework in Japan and proposing avenues for improvement.

Steve, CGV's Founding Partner, commented, 'Japan's journey in the Web3 arena resembles the old saying about creating a Buddha statue without infusing it with life. While the government has made significant strides in formulating Web3 policies and standards, there is a glaring gap in implementing these effectively and taking necessary actions,' he stressed.

The report sheds light on the Web3 landscape in Japan, highlighting that although the country has recognized the potential of Web3 and introduced favorable policies, its deeply rooted conservative culture coupled with complex bureaucratic dynamics has hindered swift advancements in innovation.

This cautious stance is reflected in Japan’s cultural inclination towards stability and aversion to risks, prompting both private enterprises and government entities to prefer well-trodden routes rather than venturing into untested technological waters. Thus, while Japan may be quick to welcome new technologies internationally, the transition to commercialization remains sluggish and disjointed.

Overview of the Current Web3 Development in Japan

In 2023, Japan's government published the 'Japan Web3 White Paper', detailing strategies for developing blockchain technology and digital assets. This initiative aims to create a supportive framework that facilitates the advancement of Web3 technologies through effective policy measures. Additionally, in 2024, legislation was enacted to permit venture capital and investment firms to hold cryptocurrency assets, indicating Japan’s strategic vision to incorporate Web3 innovations into its overarching digital economic transformation efforts.

Several prominent corporations in Japan are actively investigating opportunities within the Web3 domain. For example, Sony has established a specialized division focusing on blockchain and NFTs, and its subsidiary in Singapore, Sony Block Solution Labs, recently unveiled a Layer 2 scaling solution for Ethereum. Soneium . Meanwhile, SBI Holdings Moreover, large firms are channeling resources toward blockchain payment solutions and the management of digital assets. Now, they are teaming up with Ripple to enhance cross-border payment systems through blockchain tech. Additionally, NTT Group is honing in on blockchain infrastructure, having announced partnerships with Web3 initiatives in 2024 that explore blockchain applications in smart cities and the Internet of Things (IoT).

Despite the proactive measures taken by the Japanese government to advance Web3, businesses still face significant hurdles due to convoluted regulatory and compliance frameworks. The Financial Instruments and Exchange Act (FIEA) along with the Payment Services Act impose strict stipulations on cryptocurrency assets, including stringent anti-money laundering (AML) and Know Your Customer (KYC) protocols. This regulatory labyrinth results in escalated costs and prolonged timelines for companies aiming to secure necessary licenses and approvals.

In addition, Japan is grappling with a marked talent scarcity within burgeoning sectors like Web3, especially when stacked against other nations. 

CGV Research Advocates for Enhanced Policy Implementation, Fostering Innovation, and Boosting International Collaboration to Tackle Challenges

CGV Research emphasizes the need for the Japanese government to take decisive actions aimed at addressing the delays in policy execution. Firstly, streamlining approval processes can alleviate unnecessary bureaucratic hurdles. Furthermore, fostering interdepartmental collaboration is vital. The government could create working groups involving multiple agencies focused on driving the implementation of Web3 policies, promoting better synergy among departments and curtailing delays.

Additionally, Japan might find value in adopting a 'sandbox' regulatory framework, akin to the models in Singapore and other nations, which would enable companies to trial innovative business concepts and technologies under relaxed regulatory requirements temporarily. Hong Kong To motivate businesses to take ambitious strides in the Web3 arena, the Japanese government should roll out various incentives. For instance, tax breaks could stimulate investment in research and development, such as providing deductions for expenses linked to blockchain technology to minimize innovation costs. In tandem, establishing a dedicated innovation fund could offer financial backing to small to medium-sized enterprises in the Web3 space.

Experts agree that international partnerships are crucial for Japan's growth in the Web3 sector. Thus, Japan should actively seek collaborations with foreign countries and enterprises. Forming strategic alliances with companies from regions renowned for their blockchain proficiency, such as the United States and China, would allow Japan to glean valuable industry insights and experiences. Strengthening partnerships with international universities and research institutions could also help nurture top-tier talent and tackle the current skills gap within Japan's Web3 landscape.

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