Japan Moves to Boost VC Investments in Web3 Companies Through Cryptocurrency Acquisition Bill

The Japanese government plans to amend LPS laws to allow the acquisition and holding of cryptocurrencies, with the aim of simplifying investment processes and supporting Web3 businesses by boosting local startups.

The announcement that a cabinet decision has been taken to change the law governing limited liability funds (LPS) was made by the Ministry of Economy, Trade and Industry on 16 February 2024. This is important step which will help support the development of Web3 enterprises in Japan, according to Coinpost. Due to this modification, LPS will be allowed to capture cryptocurrency and keep it as assets. The modification is expected to reduce the hurdles Japanese venture capital (VC) firms face when trying to participate in projects that solely issue cryptocurrencies. This will make it easier for Web3 businesses in Japan to get financing. There is a general consensus among those working in the industry that this new development is positive.

A typical venture capital investment structure in Japan is known as a limited partnership fund (LPF). This structure is designed to invest in start-up companies that are not listed on any stock exchange, and the partners’ liability is limited to the amount of cash they have contributed. The current rules allow LPS to transfer shares and other comparable instruments to its investors; cryptocurrencies are not included in this category. Web3 businesses that are not permitted to issue common stock have fewer financing options available to them as a result of this restriction.

The statement was particularly well received by Web3 pioneers such as Hiro Kunimitsu, CEO of Thirdverse, who drew attention to the difficulties Web3 initiatives had when trying to get local venture capital funding under the existing regulatory framework. With a positive attitude, he expressed his hope that the newly passed law will encourage the establishment of Web3 companies in Japan.

It is expected that this legislative reform will not only benefit LPS by increasing investment prospects, but will also be in line with Japan’s larger goal of embracing Web3 technology and enterprises. The measure, which is part of efforts to boost Japan’s industrial competitiveness and encourage the creation of new businesses, will be introduced at the 213th regular session of the National Parliament, according to the Ministry of Economy, Trade and Industry, which indicated that it would be filed.

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