Japan is laying down the regulation groundwork to supercharge adoption path into Web3
Japan was a rare exception when it came to regulating crypto. Following the catastrophic collapse of Mt.Gox in 2014 – a Japan-based company – the government moved fast and early to clamp down on what was seen as an excessively risky industry. It introduced strict rules for operators, putting them under the oversight of the country’s financial regulator.
That decision means that ten years on, Web3 in Japan is evolving quite differently compared to the startup culture that’s characterized the sector in other countries. Instead, we’re seeing a more prevalent trend of large corporations levering their way into Web3 via strategic M&A and investment activities.
To date, banking giant Softbank has been one of the most active players, acquiring a controlling stake in crypto trading platform BITPoint in 2022 and becoming a key investor in a dedicated Web3 venture fund initially set up by Deutsche Bank. However, the latest news, that Sony is gearing up to launch a rebranded crypto exchange called. S.BLOX, as a result of a 2023 acquisition of local platform Whalefin, has created a froth in the crypto community.
I recently spoke to Mai Fujimoto, co-founder of INTMAX, who was fresh from the Japan Blockchain Week Summit which she hosted in early July. She confirmed that, based on the lineup of this year’s event, the corporate move into Web3 is becoming a trend:
“This [Sony] is just one such example. We just hosted many speakers from large corporations [at Japan Blockchain Week], which stood out on the Web3 conference circuit. I believe this is unique to Japan. In the United States, Coinbase and Base Chain have significantly contributed to the penetration of Web3 in the country, so we can expect similar synergies to occur in Japan as well.”
Sota Wanatabe, CEO of Startale Labs and founder of the Astar network, which already partners with Sony on the development of its own blockchain, also sees this as only the start of a developing movement:
“This development signals serious Web3 engagement from major Japanese corporations. Large companies typically need a year or two to implement such initiatives. With Web3 becoming a national policy in Japan in late 2022, we expect significant developments beyond proofs-of-concept to emerge soon.”
He’s referring to a multi-pronged Web3 national strategy initiative launched in 2022 by Prime Minister Kishida Fumio, which has seen tax reforms, the introduction of rules specific to assets such as stablecoins and NFTs, and a relaxing of rules that enables investment funds to hold digital assets as part of their portfolio.
Nevertheless, the strict and extensive rules mean that starting a digital asset offering from the ground up isn’t necessarily an easy undertaking. Daiki Moriyama, Director at gaming-focused blockchain Oasys, believes this could be a key driver of the appetite for M&A. He explains:
“While the proliferation of Web3 increases the potential for industry synergies, establishing a cryptocurrency exchange and obtaining the necessary licenses from scratch requires significant time and financial investment. Therefore, entering the market by acquiring existing cryptocurrency exchanges in a quasi-rescue capacity presents a promising strategy.”
From the perspective of smaller operators, Japan’s strict regulations can make the compliance overheads prohibitive to profitable small business operations, therefore, teaming up with larger players represents a more viable way to sustain a brand, as well as tap into the potential of vast established global audiences.
Oasys’ Daiki Moriana also points out that the entry of players like Sony is also symbolic for the reputation of the industry, having the potential to significantly advance the social perception of a field once regarded with skepticism.
Japan is effectively a case study in how even regulation perceived as relatively strict can still provide that much-needed certainty to established corporations. In this case, it’s proving to be effective groundwork for a strategic path into Web3 via acquisitions and investments, with the potential to supercharge adoption into new audiences and verticals.
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