- Regulatory approval delays are causing crypto startups to leave Japan.
- A proposed 20% flat tax on crypto gains is less of a concern than Japan’s slow approval process.
- Other markets like the UAE, Singapore, and South Korea offer faster, more flexible frameworks for crypto projects.
- Industry leaders say Japan’s culture around approvals, not taxes, is the main barrier to innovation.
- Experts recommend streamlined, risk-based approval processes and regulatory sandboxes to promote domestic growth.
Maksym Sakharov, CEO and co-founder of decentralized bank WeFi, says that long and slow regulatory approval processes—not tax rates—are the main reason crypto innovation is moving away from Japan. Even if Japan implements a 20% flat tax on crypto profits, Sakharov believes that startups and liquidity will still move offshore because of the country’s slow approval systems.
Currently, the process to list a token or launch an initial exchange offering (IEO) in Japan requires a two-step review. The Japan Virtual and Crypto Assets Exchange Association (JVCEA) first conducts a self-regulatory review, followed by final approval from the Financial Services Agency (FSA). This system can result in go-to-market delays of 6 to 12 months or longer.
Sakharov explained that delays often occur due to JVCEA token screenings, IEO white paper checks, and required notifications to the FSA about product changes. These steps often require several rounds of revisions. He stated, “The process is designed to avoid downside, not to accelerate innovation.” He added that this timeline hurts startups and leads many Japanese teams to launch their tokens overseas first.
Industry comparisons show Japan moving slower than other regions. Sakharov noted, “Singapore is strict too, but it provides clearer pathways… The UAE is faster on average… South Korea’s VAUPA focuses on ongoing exchange obligations rather than a Japan-style external pre-approval, so listings are typically processed materially faster.” He warned that new tax reforms alone will not change this unless the culture around regulatory approvals shifts.
Sakharov suggested several reforms, including “time-boxed, risk-based approvals,” a regulatory Sandbox for staking and governance, and proportional disclosure requirements. He warned that without these changes, domestic crypto projects will likely continue to scale overseas.
Other Asian jurisdictions have acted more quickly. Hong Kong launched the Ensemble Sandbox, a regulatory hub for fast innovation. Maarten Henskens from Startale Group stated that clear regulations in Asian countries attract more investment. The United Arab Emirates has also drawn international interest by introducing frameworks for tokenized securities.
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