Japan’s Web3 project team has released a white paper proposing ways to expand the country’s crypto industry to create an atmosphere welcoming to cryptocurrencies.

Japan’s ruling Liberal Democratic Party’s Web3 project team has released a white paper containing proposals for expanding the country’s industry, which has been incorporated into national strategy by Prime Minister Fumio Kishida’s government.

The Web3 project team aims to bypass the usual bureaucratic process and develop regulatory proposals for everything from non-fungible tokens to decentralized autonomous organizations (DAOs).

Compared to other governments seeking to implement consumer protection regulations, Japan is working to create a friendlier atmosphere for cryptocurrencies as many companies relocate to other countries due to high tax obligations.

According to the white paper, Japan must demonstrate leadership at this year’s G7 summit, which will address cryptocurrencies. The document recommends that the country focus on the potential benefits of Web3 and establish a prominent position on technology agnosticism and ethical innovation.

In addition, the white paper proposes additional changes to tax regulations, acknowledging that a notable exception has been granted to token issuers. These include tax exemptions for companies that own tokens issued by other companies that are not intended to be traded in the short term. It proposes enabling self-assessment and allowing investors to carry forward losses for up to three years, and proposes that cryptocurrencies should only be taxed when they are converted into fiat currency.

The white paper points out a pressing issue, namely the lack of accounting standards, which makes it difficult for Web3 businesses to find auditors. The document recommends that ministries and agencies assist the Japan Institute of Certified Public Accountants in developing guidelines. In addition, it recommends the establishment of a DAO law, modeled after Japan's godo kaisha, which is similar to a limited liability company. It also recommends amending the Companies Act and the Financial Instruments and Exchange Act.

The white paper highlights that while the screening process for tokens already in circulation is getting shorter, the evaluation of new tokens issued by foreign entities remains sluggish. It suggests that the process should be more transparent, allowing issuers to provide the necessary evaluation information.

In 2022, Japan adopted a regulatory framework for stablecoins. The new white paper stressed the importance of preparing an environment for stablecoin registration and creating a self-regulatory organization. It also suggested developing a proposal for yen-backed stablecoins.