The Japanese Ministry of Economy, Trade and Industry (METI) announced on February 16, 2024, that the Cabinet has approved amendments to the Act on Strengthening Industrial Competitiveness and the Limited Partnership Act for Investment (LPS Law). These revisions aim to stimulate corporate investment in startups and foster entrepreneurial growth, with one notable highlight being the authorization for Venture Capital Funds (VCs) to hold crypto assets.
Key Revisions in the LPS Act Amendment
The amended Limited Partnership Act for Investment now includes crypto assets in the list of permissible assets for Investment Limited Partnerships (LPS). In Japan, most venture capital funds operate as LPS entities under this law. Once enacted, startups will be able to raise capital by issuing crypto assets to VC funds. This change is expected to:
- Enhance fundraising opportunities for Web3 startups in the cryptocurrency and blockchain sectors.
- Strengthen Japan’s blockchain technology and decentralized finance (DeFi) ecosystems.
- Position Japan as a competitive hub for crypto innovation while maintaining investor protections.
Balancing Innovation and Investor Protection
Japan’s approach emphasizes both financial innovation and risk mitigation, offering insights for other jurisdictions. For instance:
- Regulatory clarity for crypto asset holdings by institutional investors.
- Framework adjustments to accommodate emerging technologies without compromising stability.
Comparative Regulatory Landscape
| Country | Crypto Asset Regulation for VCs | Key Focus |
|----------|---------------------------------|----------|
| Japan | Permitted under LPS Act | Innovation + Investor safeguards |
| USA | Case-by-case compliance | SEC oversight |
| EU | MiCA framework (2025) | Harmonized rules |
Implications for Global Markets
- Increased institutional adoption of crypto assets.
- New investment pathways for blockchain startups.
- Regulatory benchmarks for balancing growth and security.
👉 Explore how Japan’s crypto regulations compare globally
FAQ
Q: How does this amendment benefit startups?
A: Startups can issue crypto assets to VC funds, expanding access to capital and fostering innovation in Web3.
Q: What safeguards are in place for investors?
A: Japan’s framework requires LPS entities to comply with anti-money laundering (AML) and risk disclosure protocols.
Q: Will other countries follow Japan’s approach?
A: Many jurisdictions are monitoring Japan’s model to refine their own crypto investment policies.
This legislative shift underscores Japan’s commitment to becoming a leader in crypto-friendly regulation while addressing the dynamic needs of decentralized technologies.