Japan’s Legal Framework Adapts to the Web3 Era

Japan's Legal Framework Adapts to the Web3 Era

In a move towards embracing the future of technology, Japan is positioning itself at the forefront of the web3 era.

Masaaki Taira and Hideto Kawasaki, prominent Japanese congress members, have expressed their intent to develop comprehensive policies for web3. This initiative, as uncovered during a CoinDesk Japan interview, has proven to be one of the main breakthroughs in the Japanese approach to digital governance.

Also read: Japan’s $663M Startup Fund Fuels Web3, AI, and Metaverse

Pioneering a digital future: Japan’s web3 whitepaper

In April 2023, the web3 project team of the Liberal Democrat Party (web3PT) issued a landmark whitepaper signifying an ambition to use blockchain technology for multiple web3 applications. This document represented an anchor in the Japanese digital policy ecosystem regarding stimulating and supporting web3 discourses and activities. The whitepaper not only confirms Japan’s interest but also acts as a marker for future technological improvements.

“At this PT, we will continue to have vigorous discussions with the aim of developing various web3 projects using blockchain technology and promoting related measures.”

The whitepaper’s release was not an isolated event. It was a follow-up on the wider engagement of stakeholders in web3 conversations. This came to pass as the year ended when a hackathon event was organized whose main goal was to draft rules around decentralized autonomous organizations (DAOs). This event emerged as a unique platform for stakeholders to vent their expectations and concerns directly to policymakers. Kawasaki, the executive director of web3PT, emphasized the clarity this hackathon brought to both immediate and long-term Web3-related issues.

“Regarding DAO, as the hackathon progressed, not only short-term issues but also medium- and long-term issues became clear.”

Navigating the complexities of DAO

One of the biggest challenges identified is the fuzziness surrounding DAOs. In particular, the ongoing debate insists on whether, realistically, companies have to implement a smart contract to be classified as a DAO. According to web3PT chair Taira, this definition will become more refined over time. This clarity is crucial, as it will directly influence the framing of future policies and regulations concerning DAOs.

On the other hand, Kawasaki highlighted the importance of this clarity in their next steps. The upcoming white paper is expected to reflect these discussions and findings, setting a clear regulatory framework for DAOs. Beyond DAOs, the web3PT aims to understand the broader landscape of Web3 and identify key policy areas that require attention. This holistic approach ensures that Japan’s digital policy is comprehensive and forward-thinking.

“Furthermore, we would like to grasp the current situation in areas other than DAO and identify new important points for policy within web3PT.”

Tax reforms and future directions

It marked a great milestone after third-party ownership tax reform was understood and passed in the plenary session by the liberal-democratic party’s tax system investigation committee. This reform, which includes reviewing holding crypto assets issued by other companies, received approval from the cabinet at the end of December. Kawasaki’s focus now is on ensuring the effective implementation of this tax reform.

“In the future, web3PT will continue to pay close attention to the system to ensure that it does not become difficult to use as we finalize the details.”

This development is not just a technical adjustment but a tactical move aligning with Japan’s broader vision for a digital economy. It reflects an understanding of the nuances of digital assets and the need for policies that adapt to the evolving digital landscape.

Image credits: Shutterstock, CC images, Midjourney, Unsplash.