The Emergence of Web3 Startups in Japan
Japan, known for its technological advancements and innovative spirit, is now becoming a hotbed for Web3 startups. Web3, or the third generation of internet services, leverages blockchain technology to create decentralized networks and platforms. This article explores the burgeoning Web3 startup scene in Japan, highlighting key players and their contributions to this exciting new frontier.
Web3 represents the next phase in the evolution of the internet. Unlike Web2, which is dominated by corporations and centralized services, Web3 is about decentralization and user control. It leverages blockchain technology to create decentralized applications (dApps), which operate on peer-to-peer networks with no central authority. This shift has significant implications for various sectors, including finance, social media, and data storage, among others.
The Rise of Web3 in Japan
Japan has always been at the forefront of technological innovation, and the rise of Web3 is no exception. The country's robust technological infrastructure, coupled with a regulatory environment that is increasingly supportive of blockchain and cryptocurrency, has created a fertile ground for Web3 startups.
Web3 Startups Making Waves
Several Japanese startups are making significant strides in the Web3 space. Here are a few examples:
Soramitsu: Soramitsu is a blockchain technology company that has developed several innovative products, including a blockchain platform called Hyperledger Iroha and a digital identity solution called Sora ID. The company is also involved in the development of a digital currency for the Central Bank of Cambodia.
LayerX: LayerX is a blockchain company that provides a range of services, including blockchain consulting, development, and auditing. The company is also actively involved in research and development related to blockchain technology.
Warrantee: This Osaka-based startup offers free insurance services in the US and Singapore. Founded in 2013 by CEO Yusuke Shono, Warrantee began by helping consumers digitize product warranties. The company then ventured into the on-demand insurance market in 2017, collaborating with insurance companies to offer free or low-cost on-demand insurance services in the US and Singapore. Warrantee has offices in Tokyo, Osaka, Singapore, New York City, and Silicon Valley.
Cashi Cake: Based in Los Angeles, Cashi Cake is the startup behind Misaky Tokyo and other D2C-focused Japanese confectionery brands. The company uses a proprietary technology to process seaweed agar to develop high-end Japanese confectionery products. Cashi Cake has served as a vendor for the Academy Awards and Emmy Awards eve, collaborated with Kim Kardashian’s fragrance brand KKW, and been featured in the Bon Appétit food magazine.
Commmune: Tokyo-based Commmune is the startup behind a customer success support platform of the same name. The company, which has raised funds from several investors, including DNX Ventures, in Series A and Series B rounds, is expanding into the US market. Commmune offers companies an online community environment to improve user engagement, enabling them to communicate with users and receive responses, which can be challenging with conventional communication channels.
These startups are not only making waves in Japan but are also expanding their reach to international markets, showcasing the global potential of Web3 startups in Japan.
Japan's Strategic Positioning in the Web3 Industry
Japan is strategically positioning itself as a global leader in the Web3 industry, with a national strategy that promotes crypto adoption, fosters corporate collaborations, and creates a friendly regulatory environment. The country's strategic embrace of Web3 is not just a bid to regain its economic prowess but a comprehensive plan to become a global leader in the next phase of the internet’s evolution.
According to recent news on web3, in April, Japan’s ruling Liberal Democratic Party published a detailed whitepaper outlining recommendations for boosting the crypto industry in the country. This is part of Prime Minister Fumio Kishida's strategy of promoting technology, a project called "Cool Japan." The Web3 project team has been bypassing the usual bureaucratic processes to formulate regulatory proposals for everything from NFTs to decentralized autonomous organizations.
Major companies in Japan have started to enter the market. Japanese mobile phone operator NTT Docomo pledged to invest up to 600 billion yen ($4 billion) into Web3 infrastructure, and large financial institutions are looking to issue stablecoins. The white paper notes that Japan should demonstrate leadership at the Group of Seven summit this year, where crypto will be discussed, and says the country should look ahead to the future potential of Web3 and clarify its leading position on technology-neutral and responsible innovation.
Regulatory Changes and Proposals
The white paper proposes further changes to tax regulation, noting that one significant exemption for token issuers has already been approved. Among the proposals is having tax exclusions for companies holding tokens issued by other companies that aren't going to be traded short term. It advises allowing self-assessments so that investors can carry over losses for three years and says crypto should be taxed only when the assets are exchanged for fiat currency.
The document identifies a lack of accounting standards as an urgent issue as Web3 companies have had difficulties finding auditors. It says that ministries and agencies should support the Japanese Institute of Certified Public Accountants in formulating guidelines.
It also advises setting up a DAO law based on Japan's godo kaisha (a type of business similar to a limited liability company) and making changes to regulations under the Companies Act and the Financial Instruments and Exchange Act.
The white paper stresses the importance of creating a process for stablecoin registration and establishing a self-regulatory organization. It also mentions developing proposals for yen-backed stablecoins. Large companies in Japan have shown interest in the Web3 industry. The white paper, however, says that approvals for banks and insurance companies entering the industry remain unclear and says the government should lay out guidelines.
On non-fungible tokens, the white paper proposes public-private partnerships to set guidelines on legal business models for fantasy sports services. It also recommends the public and private sectors work together to sort out data and NFT rights, and consider ways for content holders to legally license NFTs.
A Web3 minister should take charge of promoting policies and cooperation with other countries, according to the document. It says that Japan's Digital Agency will set up a related consultation desk for local governments and business operators.
It also proposes the issuance of crypto visas to skilled workers and expanding the startup visa system. These strategic initiatives, corporate collaborations, and regulatory advancements are already paving the way for Japan to become a global leader in the Web3 industry.
In conclusion, the rise of Web3 startups in Japan is a testament to the country's innovative spirit and its ability to adapt to new technological trends. As the Web3 sector continues to evolve, we can expect to see more Japanese startups leading the way in this exciting new frontier of the internet.