Japan cabinet approves bill allowing Japanese VCs to invest in crypto projects

In a groundbreaking move aimed at fostering innovation in Japan’s tech ecosystem, the Cabinet has approved a bill enabling Japanese venture capital firms to invest in Web3 projects. This decision marks a significant departure from previous regulations, which hindered Japanese VCs from participating in ventures involving crypto assets.

The amendment, advocated for by industry stakeholders such as the Japan Crypto Asset Business Association (JCBA), is poised to revolutionize the landscape for Web3 startups in Japan. With the ability to invest in projects solely issuing crypto assets, Japanese VCs are now positioned to play a pivotal role in driving the growth of Web3 technologies within the country.

This development is expected to unlock new opportunities for both investors and entrepreneurs, paving the way for the emergence of a vibrant Web3 startup ecosystem in Japan.

Expanding investment horizons for Japanese VCs

Under previous regulations, Japanese venture capital firms faced limitations in investing in projects centred on crypto assets, such as virtual currencies and non-fungible tokens (NFTs). This regulatory barrier often forced Web3 startups in Japan to seek funding from overseas investors, posing significant challenges for early-stage ventures as highlighted by Hiro Kunimitsu, the former CEO of Gumi Inc., in a tweet on X.

However, with the recent approval of the bill, Japanese VCs can now participate in these projects through investment business limited partnerships (LPS), thereby streamlining the funding process for Web3 startups.

The decision to expand the scope of assets that LPS can acquire and hold to include virtual currencies aligns with the government’s efforts to promote the development of Web3 technologies and enhance Japan’s industrial competitiveness. Advocacy from the Japan Crypto Asset Business Association (JCBA) played a pivotal role in driving this regulatory reform, as the association’s recommendations underscored the potential benefits of allowing LPS to engage in activities related to virtual currencies and NFTs.

By enabling Japanese VCs to invest in Web3 projects, the government aims to stimulate innovation, facilitate job creation, and bolster economic growth in Japan. This legislative reform is expected to attract more investors to the Web3 sector, catalyzing the emergence of a dynamic ecosystem for blockchain-based innovations in the country.

As Japan embraces the opportunities presented by Web3 technologies, the stage is set for a new era of entrepreneurship and technological advancement.