Interview: Fiona, Foresight News
Edited by Kean, Foresight News
Compiled by: Peng SUN, Foresight News
TL;DR: 1. METI's mission is to increase national GDP and the overall economy. In the field of Web3.0, METI's primary goal is to strike a balance between regulation and promoting innovation. If regulation is too strict, it will discuss with the Financial Services Agency to create an environment that encourages innovation and advocate tax reform; 2. Web3.0 is changing too fast, and the regulations that have been formulated may soon become outdated or inapplicable, and need to be constantly updated to adapt to the changing environment; 3. Japan has stipulated that start-ups can issue tokens tax-free, and the government is considering amendments to address current tax issues regarding investors holding tokens and VCs being restricted by regulations from holding tokens; 4. The digital yen pilot program is still under discussion and has not yet been implemented. Japan has lifted the ban on stablecoins, and large trust companies are trying to issue yen stablecoins that support Ethereum, but are still applying for stablecoin issuance and intermediary licenses, and are expected to enter the market next year; 5. NFT is most suitable for the Japanese market, and Japanese companies and overseas startups can develop new cooperation in issuing NFTs or building GameFi services; 6. Not all companies holding IPs are interested in Web3, and Nintendo and others remain cautious. The popularity of existing IPs in the Web3 field may be greatly reduced; 7. Japan's mainstream consumers still have limited adoption of Web3, with only about 5% using Web3 wallets; Japanese companies such as Toyota, Sony, and NTT Docomo are very interested in Web3. If Japanese companies and Japanese cooperate with overseas startups to enter the Southeast Asian or Asian markets as a whole, the prospects will be very good. 8. The Japanese government has implemented tax reforms, regulatory reforms, and issued new guidelines to create a better business environment for Web3.0. At the same time, the government is also working to attract overseas startups through support from organizations such as the Japan Blockchain Association, hosting international conferences, and promoting Japan as a DAO center; 9. The Japanese government is addressing issues such as opening bank accounts and obtaining visas for overseas startups. It plans to launch a digital nomad visa and has provided a startup visa that allows companies to set up institutions in Japan for up to six months. 10. It is recommended that overseas Web3.0 projects cooperate with local government organizations that support startups, such as Shibuya Ward, which provide various measures to help open bank accounts, conduct business, and adapt to life in Japan;11. The government is working hard to build a talent pool in the field of Web3.0, paying special attention to the establishment of a developer community. It will encourage developers to participate in the construction of Web3 on a part-time basis to promote the cultivation of their community awareness; 12. The Japanese government aims to revitalize the national economy through Web3.0, expand the advantages of blockchain technology to areas such as supply chain management and trade finance to improve efficiency, and create new data sharing platforms for traditional industries.
At the end of June in Kyoto, IVS Crypto 2023 drew our attention to Japan; and a week later in Tokyo, the WebX International Forum was about to be held. This long-ignored neighbor came to the fore with a relatively mature set of crypto regulatory laws and regulations, trying to bridge the gap between the local Web3.0 and the entire crypto industry through policy-driven, and promote the development of Japan's Web3.0 industry.
Under such great pressure from global crypto regulation, Japan is one of the few countries that explicitly supports the development of Web3. In fact, Japan planted the seeds of crypto as early as 10 years ago. The crypto exchange Mt.Gox was established in Shibuya, Kyoto in 2010, and Japan supported Bitcoin payments in 2017. But if Mt.Gox (2014) and Coincheck (2018) had not been hacked, resulting in the two largest cryptocurrency exchange attacks in history, Japan might not have faded out of our sight for a long time. Since the Payment Services Act in April 2017, Japan has officially entered the era of crypto regulation, and it can even be said that it has opened the prelude to global crypto regulation. At the same time, virtual assets have been included in the Funds Settlement Act. After the Coincheck incident, Japan amended the relevant regulations in the Payment Services Act, the Financial Instruments Trading Act, and the Financial Instruments Sales Act in 2019, and in order to protect users, it required cryptocurrency exchanges to implement asset separation management, that is, to separate user funds from exchange funds. Since then, the Financial Services Agency has more or less amended the cryptocurrency regulations.
Regulatory pressure has also caused the Japanese crypto market to stagnate. Compared with the global crypto ecosystem, it can be said that Japan has missed an entire cycle of development. At the same time, since the end of the Japanese bubble economy in the 1990s, the Japanese economy has been sluggish for a long time. The Ministry of Economy, Trade and Industry (METI), established in 2001, has taken on the mission of promoting Japan's economic development and industrial innovation. However, the Japanese economy has not improved significantly in the past 20 years. Coupled with the impact of COVID-19, revitalizing the Japanese economy and regional economy has become the main topic in the post-COVID-19 era, and METI is the main promoter of this process:
In the spring of 2022, Japan released the NFT white paper; in July 2022, METI began to explore the "creator economy" (NFT, metaverse) and established the "Web3.0 Policy Office" to discuss how to build a friendly business environment for the development of Web3.0; in April 2023, the Web3 Project Team of the Liberal Democratic Party's Digital Society Promotion Headquarters published the "Web3 White Paper: Towards an Era Where Everyone Can Use Digital Assets", which was passed by the House of Representatives. Japanese Prime Minister Fumio Kishida personally promoted it and announced to the world that "Japan is Back".
Therefore, Foresight News exclusively invited Waka Itagaki, Deputy Director-General of the Ministry of Economy, Trade and Industry of Japan, from whom we can learn about the basic appearance and development plan of Japan's Web3.0.
Foresight News: In the past six months, Web3 has undergone great changes, such as the tightening of US regulation and the green light of Hong Kong's policies. How do you view this change in the global Web3 landscape? What development trends do you think will emerge in the future? What are the main opportunities for the Japanese Web3 market and industry?
Waka Itagaki (METI): The global Web3 landscape has undergone significant changes in the past six months, including increased regulatory scrutiny in the United States and crypto-friendly policies in Hong Kong. These changes show that countries/regions are striving to find a balance between innovation, consumer protection, and financial stability.
While the United States believes that consumer protection is key to achieving mass adoption, governments in Hong Kong and other countries prioritize promoting innovation. Despite the challenges, these changes can have a positive impact on the crypto industry by encouraging innovation rather than speculation.
Looking ahead, Web3 development trends indicate that crypto wallets, NFTs, and DApps will be widely adopted, which will improve efficiency and provide potential solutions to social problems.
In Japan, rich IP resources and a thriving gaming industry will provide opportunities for innovation in the Web3 space. In addition to speculation, we have many emerging use cases. For example, NFT-based projects help revitalize rural areas. A village in Japan called Yamakoshi created an NFT-based DAO, where digital citizens and community villagers share ownership of the NFT. The funds raised from these NFTs are used to promote the revitalization of rural areas. Such innovative cases continue to emerge in Japan, promoting the development of the country.
In the future, Japan is also expected to realize programmable payments and programmable currencies, expand the advantages of blockchain technology to areas such as supply chain management and trade finance to improve efficiency, and create new data sharing platforms for traditional industries (automobiles, chemicals, etc.).
Foresight News: What role does METI play in the development of Web3.0 in Japan? Which other government departments does it mainly cooperate with to promote the development of Web3.0? What are their respective responsibilities?
Waka Itagaki (METI): The Ministry of Economy, Trade and Industry (METI) plays a vital role in the development of Web 3.0 in Japan. As a government agency focused on economic growth, our mission is to increase the country's GDP and the overall economy. In the field of Web 3.0, we work closely with the Digital Agency, the Financial Services Agency, and other relevant government agencies to work together to create a business environment that is conducive to innovation.
Our primary goal is to strike a balance between regulation and promoting innovation. If regulation is too strict, we will discuss with the Financial Services Agency to create an environment that encourages innovation. In addition, we also advocate tax reforms to better support the development of the crypto industry.
There are about 10 departments related to Web3.0, and METI needs to work with these departments. For example, if it involves regulatory issues, we will work with the Financial Services Agency to develop a new policy agenda and promote its development. (It is worth noting that not all of these departments are focused on Web3.0.)
Foresight News: Compared with other countries or regions, we have noticed that Japan has established a relatively mature regulatory system and vigorously promoted the development of Web3.0 and Crypto in regulation. So, what obstacles did you encounter in this process and how did you overcome them?
Waka Itagaki (METI): Influenced by events such as the Coincheck hack in 2018, Japan has successively formulated regulations for cryptocurrency exchanges and stablecoins, and the Financial Services Agency has played an important role in formulating these regulations. However, one difficulty we at METI face is that Web3.0 is changing too fast, and the regulations that have been formulated may soon become outdated or inapplicable.
For example, back in 2015, Bitcoin was the dominant cryptocurrency. But now there are so many cryptocurrencies and applications that regulations such as the Payment Services Act, which was enacted in 2016, are somewhat outdated. In addition, Japan’s tax system is closely tied to the definition of accounting and taxation, relying heavily on the concept of taxable assets. As a result, the tax and accounting systems are problematic and need to be constantly updated to adapt to the constantly changing environment.
Regarding the motivation to overcome these challenges, I answer from two aspects. Personally, I believe in the transformative power of new technologies, and in the long run, I believe it will create a better society. I like to create an innovative environment, and I am very interested in the concept of Web3.0, in which tokens can incentivize behavioral changes, and individuals can contribute to projects according to their abilities and receive economic incentives and rewards. Therefore, the new economic model brought by Web3.0 is very attractive to me.
On the other hand, as government officials, we recognize that Web3.0 and blockchain technology have the potential to boost the Japanese economy. The Japanese market has not been developing well in the digital field in the past few years. By building a good Web3.0 ecosystem, we aim to attract overseas startups and revitalize the economy. This is what we are working towards.
Foresight News: What is the implementation and progress of the proposals and guidelines outlined in the "Web3.0 White Paper" (Cool Japan) released in April this year? What implementation plans does the Japanese government have in terms of DAO, NFT, taxation, accounting system, etc.?
Waka Itagaki (METI): The Japanese government has made a lot of efforts to implement these proposals. We can see that the government has enacted new legislation and the policies are more stable and clear. The Japan Institute of Certified Public Accountants has set up a study group to develop auditing and accounting standards related to crypto assets.
In terms of taxation, a new tax system has been introduced, and tokens issued by startups are tax-exempt. However, challenges remain. For example, the government is considering amendments to address current tax issues regarding investors holding tokens and VCs being restricted by regulations from holding tokens.
The goal outlined in the white paper is to promote innovation among Japanese startups and large companies, with a focus on creating a business environment conducive to their success, including access to VC funding. Currently, Japan is working to build the necessary infrastructure and support the ecosystem to drive regional innovation.
Foresight News: Japan has begun piloting the digital yen and lifting the ban on stablecoins. What opportunities will this bring to the Japanese economy?
Waka Itagaki (METI): Although the digital yen pilot program is still under discussion and has not yet been implemented, Japan has lifted its ban on stablecoins. Large trust companies such as Mitsubishi UFJ Trust and Banking Corporation (MUTB) are trying to issue yen stablecoins that support public chains such as Ethereum. These stablecoins are expected to promote digital transformation, such as improving the efficiency of supply chain management and building data sharing platforms between companies. Although the new regulations will take effect in June 2023, companies are still in the process of obtaining stablecoin issuance and intermediary licenses, and yen stablecoins are expected to enter the market next year.
Foresight News: Japan has a well-developed gaming and animation industry, and its IP is at the world's leading level. These are resources unique to Japan. How will you use these advantages to promote your global development in the fields of NFT, gaming, and the metaverse?
Waka Itagaki (METI): The whole world is curious about how Japan will develop Web3 using the gaming industry and IP. We think there is a path that is feasible, that is, Japanese companies and overseas startups can develop new cooperation in issuing NFTs or building GameFi services. There is already a trend that overseas startups are interested in entering the Japanese market and have established entities in Japan. However, not all companies holding IP are interested in Web3. While some companies (such as Sanrio or Toei Animation) are actively developing in conjunction with Web3, companies like Nintendo remain cautious due to concerns from existing users and skepticism about the history of cryptocurrencies. In addition, the popularity of existing IPs in the Web3 field may be greatly reduced, affecting their participation. In short, each company has a different attitude towards Web3.
Foresight News: Based on the current regulatory environment in Japan and the preferences of Japanese market participants, which category or categories of on-chain applications do you think are most suitable for the Japanese market?
Waka Itagaki (METI): When comparing DeFi, NFTs, and DAOs, I think NFTs are the best fit for the Japanese market. Even people who are not interested in cryptocurrencies generally have a favorable impression of NFTs because Japan has unique use cases such as Yamakoshi NFTs and emerging social applications. However, mainstream consumer adoption of Web3 in Japan is still limited, with only about 5% of people using Web3 wallets. In contrast, Web3 is more popular in developing countries in Southeast Asia and Latin America. However, Japanese companies such as Toyota, Sony, and NTT Docomo are very interested in Web3. If Japanese companies and Japanese people interested in Web3 cooperate with overseas startups to enter the Southeast Asian or Asian market as a whole, the prospects will be very good.
Foresight News: What measures will the Japanese government take to improve the business environment of Web3.0, retain local Web3.0 companies, and attract overseas Web3.0 companies? And how should overseas Web3.0 projects be implemented in Japan?
Waka Itagaki (METI): The Japanese government has implemented tax reforms, regulatory reforms, and issued new guidelines to create a better business environment for Web 3.0. At the same time, the government is also working to attract overseas startups through support from organizations such as the Japan Blockchain Association, hosting international conferences, and promoting Japan as a DAO hub.
However, there is room for further improvement. Issues such as opening bank accounts and obtaining visas for overseas startups are being addressed. The Japanese government plans to introduce a digital nomad visa and already offers a startup visa that allows companies to set up operations in Japan for up to six months.
In order to conduct business in Japan, overseas Web3.0 projects are advised to work with local government organizations that support startups, such as Shibuya Ward. These organizations offer various measures to help companies and employees open bank accounts, conduct business, and adjust to life in Japan. Establishing connections with these resources can be of great benefit to overseas startups looking to enter the Japanese market.
Foresight News: Going further, what is the Japanese government's plan for Web3.0 talent reserves? What preferential conditions are there to attract overseas talents?
Waka Itagaki (METI): Currently, the government is working hard to build a talent pool in the Web3.0 field, with a special focus on the establishment of a developer community. However, there are certain challenges in connecting Web2 and Web3 developers, and Japanese and international developer communities. Some developers believe that Web3 projects are risky and unsustainable due to the volatility and speculation in the cryptocurrency market. To solve this problem, it is necessary to create sustainable businesses that contribute to socioeconomic value. By popularizing emerging Web3 applications, developers can be encouraged to participate in the construction of Web3 on a part-time basis, promoting the cultivation of its community awareness.
Japan’s safety and quality of life can attract people who have a favorable impression of the country. While it is not easy to formulate specific policies to attract overseas developers, creating programs that promote cooperation between Japanese and international developers or between Japanese projects and overseas developers can pave the way for partnerships and global cooperation.
Foresight News: What kind of changes does the Japanese government hope to bring to Japan’s social economy through Web3.0 and the Metaverse? What are your expectations?
Waka Itagaki (METI): The Japanese government aims to revitalize the country's economy by embracing new innovations, attracting overseas startups and international talent. We believe that Web3.0 can bring economic and social benefits to society. By incorporating Web3.0, we expect social issues to be resolved and industry data sharing platforms to be created. For example, startups are using tokens to incentivize users to contribute data such as photos of electrical equipment. This approach can solve expensive maintenance problems while creating new economic value for society. The government hopes to promote such a transition through the Web3.0 initiative.
