While Japan is often seen as a tech-savvy nation, its crypto industry is struggling to compete globally—not due to taxes, but due to its sluggish regulatory system.
Regulatory Bottlenecks Drive Crypto Startups Offshore
According to industry insiders, Japan’s slow and risk-averse approval process is the biggest obstacle holding back Web3 innovation. Maksym Sakharov, CEO of decentralized bank WeFi, believes that even the proposed 20% flat tax on crypto gains won’t fix the real issue.
“The 55% tax is painful, but the approval culture—not taxation—is pushing liquidity abroad,” he explained.
Japan requires a two-step token listing process, starting with the Japan Virtual and Crypto Assets Exchange Association (JVCEA), followed by the Financial Services Agency (FSA). This regulatory sequence can stretch over 6–12 months, making it impractical for fast-moving startups.
“The system is designed to prevent risk, not promote innovation,” Sakharov added.
Token Listings Lag Behind Other Asian Jurisdictions
When compared to countries like the UAE, Singapore, and South Korea, Japan’s crypto approval timelines are notably slower. In places like South Korea, the focus is on ongoing compliance, allowing quicker market entry.
“Singapore is strict, but clearer. The UAE is faster. South Korea skips Japan’s external pre-approval model altogether,” Sakharov stated.
He also warned that Japan’s proposed tax changes won’t help unless the culture shifts. “Culture eats tax cuts for breakfast,” he said, emphasizing the need for regulatory agility.
Proposed Solutions to Revive Japan’s Crypto Industry
To catch up with other countries, experts recommend that Japan implement time-boxed, risk-based approvals, create a functional sandbox for DeFi and staking trials, and move toward proportional disclosure requirements.
Without reform, Japanese projects may continue scaling abroad, losing domestic talent and capital in the process.
“It’s about building for 12 months only to hear your token can’t list,” Sakharov warned.
Asia Leads the Way as Japan Falls Behind
While Japan builds for long-term security, regions like Hong Kong are accelerating with innovation hubs like the Ensemble Sandbox, drawing global capital. Meanwhile, the UAE’s progressive frameworks have turned it into a magnet for tokenized finance.
Without streamlining its regulatory culture, Japan risks missing out on the next wave of blockchain growth.
Disclaimer
This content is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency trading involves risk and may result in financial loss.