The Japanese government has taken a significant step toward integrating digital assets into its mainstream financial ecosystem with the recent approval of a legislative amendment that could reshape the country’s venture capital and Web3 investment landscape. On February 16, 2025, Japan’s Cabinet approved a revision to the Industrial Competitiveness Enhancement Act, paving the way for investment limited partnerships—including venture capital (VC) firms and private equity funds—to legally acquire and hold crypto assets.
This strategic policy shift reflects Japan’s growing commitment to fostering innovation in blockchain technology and positioning itself as a leader in the global Web3 movement. By removing regulatory barriers that previously prevented domestic investment vehicles from directly participating in crypto markets, the government aims to stimulate local innovation, attract talent, and empower homegrown startups to thrive without relying on foreign capital.
A New Era for Japanese Venture Capital
Under the revised framework, investment limited partnerships (ILPs)—a common legal structure used by Japanese VCs to pool capital—will be explicitly permitted to include digital assets in their portfolios. This change addresses a long-standing limitation that forced many Japanese Web3 startups to seek funding from overseas investors, often facing complex compliance hurdles and delayed timelines.
👉 Discover how Japan's crypto investment shift is unlocking new opportunities for innovators.
Hiro Kunimitsu, founder and CEO of game development company Gumi Inc., emphasized the importance of this development: “Previously, Japanese crypto projects had no choice but to turn to foreign venture capital for funding—a process fraught with logistical and regulatory challenges.” With domestic investors now able to participate directly, Kunimitsu believes the new law will catalyze a surge in homegrown Web3 entrepreneurship.
The reform is part of Prime Minister Fumio Kishida’s broader economic revitalization agenda, which places strong emphasis on supporting next-generation technologies like blockchain, decentralized finance (DeFi), and tokenized ecosystems. Web3—the decentralized evolution of the internet powered by blockchain—is seen as a cornerstone of Japan’s digital transformation strategy.
Regulatory Evolution: From Strict Oversight to Strategic Innovation
Historically, Japan has maintained one of the most stringent yet forward-thinking regulatory environments for digital assets. Known for prioritizing investor protection and market integrity, the country was among the first to legally recognize cryptocurrencies as a legitimate form of payment under the amended Payment Services Act in 2017.
Since then, Japan has continued to refine its approach. While maintaining tight controls on exchanges and anti-money laundering (AML) compliance, regulators have gradually eased restrictions in areas such as token listings and tax treatment. Notably, Japan has been at the forefront of developing a comprehensive regulatory framework for stablecoins—a move aimed at promoting financial innovation while safeguarding monetary stability.
The latest amendment signals a maturation of Japan’s digital asset policy: shifting from risk mitigation to proactive enablement. By allowing institutional investors direct exposure to crypto assets, the government acknowledges their growing role in modern finance and innovation financing.
Empowering Web3 Startups Through Token-Based Funding
One of the most transformative aspects of the proposed law is its potential to normalize token-based fundraising models. Many early-stage Web3 startups raise capital by issuing utility or governance tokens rather than traditional equity. However, due to previous regulatory ambiguity, Japanese VCs were often unable to accept tokens as compensation for funding, putting local investors at a disadvantage.
With the updated legislation, venture firms will be able to invest in Web3 startups in exchange for digital tokens—an arrangement that aligns with global industry practices. This not only levels the playing field but also enables faster exits through secondary markets or decentralized exchanges, offering more flexibility than traditional IPO routes.
Moreover, the change supports broader financial innovation, including asset tokenization, fractional ownership, and programmable finance. As blockchain-based business models become more prevalent, Japan’s updated legal infrastructure ensures it remains competitive on the global stage.
Global Implications and Industry Outlook
Japan’s legislative move is being closely watched by policymakers and investors worldwide. According to CoinDesk, if passed, this reform could set a precedent for other G7 nations considering similar measures to integrate digital assets into institutional finance.
👉 See how institutional crypto adoption is gaining momentum across Asia.
The bill is expected to undergo debate in Japan’s current parliamentary session. If enacted, it would mark one of the most significant pro-crypto regulatory shifts in a major developed economy.
Industry experts believe this development could trigger a wave of institutional interest in Japanese Web3 ventures. With clearer rules and expanded investment channels, both startups and investors stand to benefit from increased liquidity, transparency, and long-term growth potential.
Frequently Asked Questions (FAQ)
Q: What does the new Japanese crypto bill allow?
A: The revised Industrial Competitiveness Enhancement Act will permit investment limited partnerships—such as venture capital funds—to legally acquire and hold crypto assets as part of their portfolios.
Q: Why is this change important for Web3 startups?
A: It enables domestic investors to fund Web3 companies in exchange for tokens, eliminating reliance on foreign capital and streamlining early-stage financing.
Q: When will the law take effect?
A: The bill has been approved by the Cabinet and is expected to be debated in Japan’s current parliamentary session. No official enactment date has been announced yet.
Q: Does Japan regulate cryptocurrency?
A: Yes. Japan has a well-established regulatory framework for crypto exchanges and digital asset services, emphasizing consumer protection and anti-money laundering standards.
Q: Can individuals already invest in crypto in Japan?
A: Yes. Retail investors have long been able to trade cryptocurrencies through licensed exchanges. This new law focuses on expanding access for institutional investors like VC firms.
Q: How does this affect global crypto markets?
A: As a G7 nation with strong financial governance, Japan’s endorsement of institutional crypto investment may encourage similar reforms in other developed economies.
Looking Ahead: Building a Sustainable Web3 Ecosystem
Japan’s latest legislative initiative underscores a strategic pivot—from cautious regulation toward active participation in the digital asset economy. By enabling venture capital firms to invest directly in crypto assets, the government is not only supporting technological innovation but also reinforcing Japan’s status as a hub for responsible fintech advancement.
As discussions continue in parliament, stakeholders across finance, technology, and policy sectors are optimistic about the long-term impact. With proper safeguards in place and a clear vision for growth, Japan is poised to lead Asia’s next wave of blockchain-driven transformation.
👉 Stay ahead of the curve in Japan's evolving crypto investment landscape.
Core Keywords:
- Japan crypto asset legalization
- venture capital crypto investment
- Web3 startup funding
- digital asset regulation
- blockchain innovation Japan
- institutional crypto adoption
- token-based fundraising
- investment limited partnership crypto
Final word count: 1,068