A marked hostility towards new and emerging Web3 technologies such as cryptocurrencies risks costing Japan its place as the gaming capital of the world. We’re getting dangerously close to the point of no return, and here’s why.
No one can be sure where the country’s antagonism with crypto originated or why it still persists even after the non-fungible token (NFT) and crypto “boom” of 2021, which took off globally and prompted officials of the United States and Europe to reverse their initial antipathy for space, and finally open up to regulations. The White House just released its first crypto regulatory framework in September 2022, and the European Parliament Committee followed up in October 2022 by approving the Markets in Cryptoassets framework, also known as MiCA, with a landslide vote. As the first European crypto policy, the much-discussed MiCA text represents revolutionary progress in the direction of what many see as the future of the financial world.
Japan, however, takes a very different stance.
We all know that Japan is home to gaming giants like Nintendo and Sega and has been for decades, with hits like Super Mario, Sonic the Hedgehog, Sega Mega Drive and Game Boy. But, to remain on top of its game (pun absolutely intended), the industry must be able to change steadily and rapidly with the times, not remain stuck where it was when it first gained recognition. Gaming is a highly creative space and has always had the technology to support its extraordinary potential. But, to do so, you need to be able to keep up with new and evolving innovations, or you will become stagnant and lethargic.
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GameFi is an emerging area of interest in the industry with immense potential. But when you take a closer look, there are very few Japanese companies that are developing the GameFi sector in what is likely to be a few years or a decade from now. And if that doesn’t change soon, the entire industry will be at risk.
The worlds of cryptocurrency and technology are two of the main stages of the exciting and rapidly evolving progress occurring in the modern age, and in Japan, they are being held hostage to crucial elements like taxes and a complicated selection process.
In Japan, there is no reason to account for crypto assets properly, and none of the auditors want to audit crypto assets. Due to the strict listing rules set by the Financial Agency, the process of listing a currency in Japan can be confusing and frustrating. But, when time is money for any entrepreneur with a bright idea, waiting six months for a token to be evaluated is unnecessarily daunting.
Then there are the taxes. In Japan, token issuers pay taxes on unrealized assets at the end of the fiscal year, regardless of whether they have enough fiat currency to cover the high taxes or not. And, while non-crypto stock earnings are taxed according to a flat 20% rate, crypto earnings are subject to an exorbitant 55% tax rate, a difference of 35 points.
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As Japan’s reputation falters, other countries will be waiting with open arms to embrace its brilliant minds and intrepid entrepreneurs who simply cannot understand why their country turned its back on them. Europe is full of investor-friendly nations with sound regulatory systems, like the Netherlands. With the new MiCA legislation as close as it is to being widely implemented, it is not far-fetched to wonder whether other countries would be better suited to host Japan’s brain drain.
In fact, we might be seeing small improvements in the right direction. The government may be inclined to soon ease current onerous listing rules and allow the country’s $1 trillion crypto trading market to flourish a little more easily, with exchanges able to “list more than a dozen coins in one go and without a lengthy selection process. And since taking office in 2021, Japan’s Prime Minister Fumio Kishida has prioritized the development of Web3 as a means of “economic revitalization,” meaning we could see a marked change in the way the country regulates cryptocurrencies and supports the growth of the Web3 sector as a whole.
But time is ticking, and if only time tells how Japan’s role in the gaming sector will affect its future economy, it’s hard to be overwhelmingly optimistic.
Shinnosuke “Shin” Murata is the founder of blockchain game developer Murasaki. He joined the Japanese conglomerate Mitsui & Co. in 2014 to carry out automotive finance and transactions in Malaysia, Venezuela and Bolivia. He left Mitsui to join a sophomore startup called Jiraffe as the company’s first sales representative, and then joined STVV, a Belgian soccer club, as COO, helping the club create a token. community. He founded Murasaki in the Netherlands in 2019.
This article is for general information purposes and is not intended to be and should not be taken as investment or legal advice. The views, thoughts, and opinions expressed here are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
