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Japan's Ascent in Crypto and Web3, A Challenge for South Korea

The spirit of Seoul possesses the potential to not only rival but surpass the ambitions of Tokyo in this dynamic arena
By Josefina Dipaolo
October 5, 2023

In the rapidly evolving landscape of crypto and Web3 technologies, Japan is emerging as a formidable contender, aiming to establish itself as a powerhouse in this dynamic sector. Meanwhile, South Korean analysts and experts are keeping a close watch on these developments, contemplating whether Seoul still possesses the potential to outshine Tokyo in this digital arena.

South Korea's largest newspaper, Chosun Ilbo, has reported that crypto firms in Seoul are apprehensive about Japan's proactive policies nurturing the Web3 ecosystem. These policies have the potential to transform Japan, a long-standing political and economic rival of South Korea, into a "crypto and Web3 El Dorado," as expressed by the newspaper.

While South Korea contemplates tightening regulations in response to a series of controversies, Japan seems to be heading in the opposite direction. Japan's crypto regulations are widely regarded as some of the most stringent globally. However, Prime Minister Fumio Kishida has shown a keen interest in deregulating certain segments of the crypto market.

In recent months, self-regulating crypto exchange bodies in Japan have started to relax their stringent token listing policies. Moreover, the government is in the process of reforming crypto tax laws that have been criticized for deterring Japanese companies from entering the market.

Chosun Ilbo noted, "While South Korea, once considered a powerhouse in virtual assets, is declining due to government regulations and a decline in investors, Japan is on the rise. The government is taking the lead with the implementation of support measures [for the sector] and the easing of regulations."

The newspaper also highlighted Prime Minister Kishida's participation in the inaugural WebX conference in Japan, hosted by CoinPost, the country's largest crypto-focused media outlet. Notably, Kishida was not alone in representing the government at the event, as the nation's economy minister and the chair of the ruling Liberal Democratic Party's policy research council also addressed the conference. The event featured prominent figures from the crypto industry, including Changpeng "CZ" Zhao of Binance and Roger Ver, often referred to as the "Bitcoin Jesus."

Prime Minister Kishida's commitment to the Web3 sector dates back to May 2022 when he first unveiled his intentions during a meeting with investors in London. Subsequently, he made several Web3 pledges, leading to the formulation of a "basic policies" framework in November 2022. The Liberal Democratic Party (LDP) has also established Web3 and NFT task forces, which began advocating for tax reforms in December of the same year.

Chosun Ilbo traced Japan's Web3 policy roots to a cabinet meeting in 2021 when ministers decided to provide "intensive support to Web3" firms, with the aim of fostering startups and accelerating digital transformation. The media outlet also reported that Japan has expedited tax reforms and stablecoin issuance regulations, granting legal permission for Japanese banks and trust operators to issue and distribute stablecoins in June. In contrast, South Korean firms are still awaiting approval for stablecoin initiatives.

Consequently, overseas crypto-related companies are increasingly turning their attention to Japan, with notable players like Binance and South Korean gaming giant Netmarble making strategic moves to tap into the Japanese market. Binance, for instance, successfully entered the Japanese crypto sector in August 2023 through an M&A deal with a domestic startup.

Experts contend that South Korean "government and politicians" should prioritize fostering the domestic market and easing regulations to bolster the nation's position in the evolving crypto and Web3 landscape.

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