Japanese Legislators Set to Allow Asset Managers to Hold Crypto

The Japanese cabinet has approved legislation that will allow investment funds and venture capital firms to own cryptocurrencies. If approved by the parliament, the legislation could clear the way for institutional investors in Japan to receive cryptocurrency in return for funding Web3 startups, potentially supercharging Web3 growth and innovation in the Asian nation.

The legislation is expected to be introduced to Japan’s parliament, the Diet, during the current 150-day sitting period, which began in January.

Legislation Part Of Larger Industrial Competitiveness Agenda

The legislation to allow institutional investors to hold crypto was an amendment to Japan’s Industrial Competitiveness Enhancement Act, which according to the Ministry of Economy, Trade and Industry, is intended to “promote the creation of new businesses and investment in industries.”

The ministry said the amendment was also designed to, “expand strategic domestic investment, large-scale and long-term tax measures for investment and production in strategic fields,” and to “promote innovation and metabolism that leads to the expansion of domestic investment, we will take measures such as centralized support for medium-sized companies and startups that are the driving forces of our economy.”

Japan has for some time been seen as a leader in crypto legislation, particularly in the areas of stablecoin regulation and retail investor protections.

Japan And South Korea Look To Beef Up Consumer Protections

While looking to make it easier for VCs to get into crypto, Japan’s government is simultaneously strengthening protections for retail investors, which has the potential to complicate crypto for the average person.

Japan’s main financial regulator, the Financial Services Agency (FSA), has made several suggestions to further protect retail investors from what it calls “unlawful transfers” to crypto exchanges. The most potentially impactful of these from a consumer standpoint is the recommendation that both the sending and receiving accounts involved in a transaction must be registered under the same name, potentially killing peer-to-peer (p2p) transfers.

Similarly, Japan’s neighbour South Korea, is also looking to strengthen retail investor protections, with its Financial Intelligence Unit (FIU) announcing it plans to introduce a preemptive trading suspension system this year. The system would block transactions deemed suspicious, even before an investigation has taken place.