The Web3 project team of Japan’s ruling Liberal Democratic Party has published a white paper with suggestions for expanding the country’s industry, which has been incorporated into the national strategy by the administration of Prime Minister Fumio Kishida.
The Web3 project team aims to bypass the usual bureaucratic processes for formulating regulatory proposals of everything from non-fungible tokens (NFTs) to decentralized autonomous organizations (DAOs).
Unlike other governments seeking to implement consumer protection regulations, Japan is striving to establish a more welcoming environment for cryptocurrency, as many companies have relocated to other countries due to high tax liabilities.
According to the white paper, Japan is to show leadership during this year’s G7 summit, which will address issues related to cryptocurrency. The document recommends that the nation focus on the potential benefits of Web3 and establish a prominent stance on ethical and technology-agnostic innovation.
In addition, the white paper recommends additional tax rule changes, acknowledging that a notable exception has already been granted to token issuers. This includes tax breaks for companies that hold tokens issued by other companies that are not intended to be traded in the short term. He suggests enabling self-assessments, allowing investors to carry forward their losses for up to three years, and proposes that cryptocurrency is only taxed when it becomes fiat currency.
The white paper points to an urgent concern regarding the lack of accounting standards, which has made it difficult for Web3 companies to find auditors. The document recommends that ministries and agencies help the Japan Institute of Certified Public Accountants to create guidelines. Furthermore, he suggests establishing a DAO law, modeled after the Japanese godo kaisha, which is comparable to a limited liability company. It also suggests modifications to the Companies Law and the Financial Instruments and Stock Market Law.
The White Paper highlights that the selection process for tokens already in circulation is getting shorter, but the evaluation of new tokens issued by foreign entities remains slow. He suggests that the procedures be made more transparent, allowing issuers to provide essential information for assessment.
Last year, Japan adopted a framework to regulate stablecoins. The new white paper underlines the importance of preparing the environment for stablecoin registration and creating a self-regulatory organization. He also suggests developing proposals for yen-backed stablecoins.
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