According to Maksym Sakharov, co-founder and CEO of web3 company Wefi, Japan’s regulatory bottleneck is not taxes, but the real reason why cryptography innovation is leaving the country.
Sakharov told Cointelegraph that Japan’s “slow, normative, and risk aversion” approval culture will continue to push startups and liquidity offshore, even if a 20% flat tax on crypto profits is implemented.
“The 55% progressive tax is painful and very noticeable, but it’s no longer a core blocker,” he said. “The lack of a pre-FSA/JVCEA approval model and a truly dynamic sandbox keeps builders and liquidity offshore.”
The launch of a list of tokens or initial exchange offering (IEO) in Japan involves a two-stage regulatory process. First, a self-regulatory review by the Japan Virtual and Crypto Asset Exchange Association (JVCEA) is required, followed by final oversight by the Financial Services Agency (FSA).
The process can extend the timeline to the market for six to 12 months or more, Sakharov said, adding that “the runway has to be burned and the first overseas teams have to be named to many Japanese teams.”
He noted that repeated notifications to the FSA in regions such as JVCEA token screening, IEO whitepaper reviews and product change notifications. “This process is designed to avoid the downsides rather than accelerate innovation,” he pointed out.
Japan is proposing new changes. sauce: Cointelegraph
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Japan tracks United Arab Emirates, Korea and Singapore
Compared to other jurisdictions, Sakharov said Japan is far behind. “Japan is slow,” he said. He said a simple token list could take more than six months.
“Singapore is stricter, but offers a more clearer route. The UAE is faster on average. Korean Vopa focuses on ongoing exchange obligations rather than on-site pre-approval of Japanese style, so the list is usually processed faster.”
He warned that 20% tax and crypto reclassification as a financial product will not change the status quo unless the culture of approval changes. “Culture eats tax cuts for breakfast,” Sakarov said.
As a solution, Sakharov urged regulators to adopt “timebox risk-based approval,” implement functional sandboxes to support staking and governance experiments, and to introduce proportional disclosure requirements.
He warned that without these changes, domestic crypto projects are likely to be attributed to uncertainty about approval and long latency, not tax burden. “It’s about building it for 12 months just because you list tokens and you say you can’t launch the product.”
Related: The wealthy shift in Asia is from US dollar to Crypto, Gold, China
Asia’s lead in cryptography is attracting global attention
Earlier this month, Maarten Henskens, head of protocol growth at the Startale Group, said Asian leadership in tokenization has attracted attention from global investors and there is clarity in regulations in regions that attract capital that once was on the sidelines.
Hong Kong moved quickly and launched its ensemble sandbox as a regulatory innovation hub for high-speed trucks. “While Japan is building long-term depth, Hong Kong shows how agility can make experiments possible,” says Henskens.
The United Arab Emirates was another Asian country that was making progress in tokenization. City regulators have introduced progressive frameworks to encourage the issuance and trading of tokenized securities, attracting global investors and fintech companies.
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