Japan advances legislation to enable investment funds to hold crypto assets

In a significant development signaling Japan’s evolving stance on cryptocurrencies, Prime Minister Fumio Kishida’s administration has made strides towards allowing venture capital firms and investment funds to hold crypto assets directly. 

The move aims to amend Japan’s Industrial Competitiveness Enhancement Act to accommodate digital assets as eligible investments for investment limited partnerships commonly utilized by venture capital firms. 

This shift underscores Japan’s intent to embrace the potential benefits of digital assets within its investment ecosystem.

Key highlights

Legislative Approval: The cabinet under Prime Minister Kishida approved the bill’s text on February 16, marking a crucial step towards its submission to the Diet, Japan’s parliament, for deliberation. 

The proposed amendment aims to provide venture capital firms and investment funds greater flexibility to engage with cryptocurrencies, aligning with Japan’s broader objective of fostering innovation and economic growth.

Focus on Web3 Firms: Prime Minister Kishida’s economic agenda prioritizes the support for Web3 firms, indicating a strategic alignment with emerging technologies and digital innovation. The proposed legislative change reflects Japan’s commitment to staying competitive in the global digital landscape.

Gradual Regulatory Easing: While Japan has been traditionally known for its stringent regulations in the digital asset sector, recent initiatives have demonstrated a gradual easing of certain crypto rules concerning token listings and taxation. 

The proposed bill marks a significant departure from the conservative regulatory approach, signaling a recognition of the evolving nature of digital assets and their potential impact on the investment landscape.

Market implications

The global cryptocurrency market has recently surpassed a total market capitalization of $1.92 trillion, indicating a continued investor interest and adoption surge. Despite experiencing a modest 0.88% change in the past 24 hours, the market cap has witnessed a remarkable 76.87% surge compared to one year ago. 

Bitcoin remains the dominant player, commanding a market cap of $1.02 trillion, representing approximately 53% of the total cryptocurrency market.

As Japan progresses toward embracing digital assets within its investment landscape, stakeholders will closely monitor the bill’s progress through the Diet. The outcome of the upcoming debate could significantly influence Japan’s regulatory trajectory and positioning in the global blockchain and digital landscape. 

If the proposed amendment receives approval, it could pave the way for increased exposure to cryptocurrencies within Japan’s investment sector, fostering innovation and potentially attracting new capital into the market.