In recent years, Japan has emerged as a formidable force in the crypto and Web3 industry, leaving South Korea concerned about its own standing in the global market. Japanese government policies aimed at fostering the growth of the sector have the potential to transform Tokyo into a “crypto and Web3 El Dorado,” according to South Korea’s largest newspaper, Chosun Ilbo. While South Korea contemplates stricter regulations following a series of controversies, Japan appears to be taking a different approach, signaling its intention to become a dominant player in the blockchain industry.
As the long-standing political and economic rival of Japan, South Korea’s crypto firms are wary of Tokyo’s proactive stance in supporting Web3 development. The Japanese government, led by Prime Minister Fumio Kishida, is looking to loosen restrictions and deregulate certain sectors of the crypto market. This shift in approach is reflected in the self-regulating crypto exchange bodies relaxing their token listing policies and the ongoing reform of Japan’s crypto tax laws, which were previously criticized for discouraging local companies.
Prime Minister Kishida’s commitment to the Web3 movement has become evident through his active participation in events and conferences focused on blockchain technology. Kishida delivered a video speech at the prestigious WebX conference in July, organized by Japan’s leading crypto-focused media outlet, CoinPost. This high-profile event also featured influential figures such as the nation’s economy minister, the ruling Liberal Democratic Party’s policy research council chair, Changpeng “CZ” Zhao of Binance, and the renowned “Bitcoin Jesus” Roger Ver. Kishida first expressed his Web3 aspirations during an investor meeting in London in May 2022. Subsequently, he made several pledges concerning Web3 policies, with a framework set to be finalized in November 2022. The LDP has established dedicated taskforces for Web3 and non-fungible tokens (NFTs), actively pushing for tax reforms to facilitate growth in these areas.
Japan’s Early Adoption and Progressive Reforms
Japan’s commitment to embracing Web3 can be traced back to a cabinet meeting in 2021 when ministers decided to provide intensive support to Web3 companies and promote digital transformation. The country has since expedited tax reforms and the establishment of stablecoin issuance laws. In June, Japanese banks and trust operators gained legal permission to issue and distribute stablecoins, giving them a competitive edge over their South Korean counterparts still awaiting the green light. Consequently, international crypto companies are flocking to Japan, including industry giant Binance and South Korean gaming titan Netmarble. Binance successfully entered the Japanese crypto market through an M&A deal with a domestic startup in August 2023. Experts highlight the need for South Korea’s government and politicians to pay closer attention to fostering the domestic market and easing regulations in order to remain competitive.
Despite Japan’s remarkable progress, South Korea possesses a distinct advantage in the realm of cultural content, thanks to the global popularity of K-pop and Korean dramas. While Japan may be gaining ground in the crypto sector, South Korea’s vibrant entertainment industry remains its competitive differentiator. Recognizing this, South Korean crypto industry insiders call for greater government support and regulatory reforms to protect and nurture the local market.
South Korea finds itself at a critical juncture, watching Japan surge ahead in the crypto and Web3 landscape. Tokyo’s proactive approach to regulation and its supportive ecosystem have created an environment conducive to innovation and growth. South Korea must reimagine its regulatory framework, leverage its cultural strengths, and provide the necessary support to its thriving crypto industry to retain its competitive edge in the global blockchain market. Failure to do so risks Japan solidifying its position as the new powerhouse of the crypto and Web3 world.
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