Japan may allow investment funds to hold Crypto is one of the most advanced and innovative countries in the world, especially when it comes to technology and finance. The country has been a pioneer in adopting and regulating cryptocurrencies, such as Bitcoin, since 2017. However, until recently, there was a major obstacle to the growth and development of the crypto industry in Japan: the inability of investment funds to hold digital assets directly.
Japan may allow investment funds to hold Crypto
This restriction prevented venture capital firms and other investment funds from investing in web3 startups, which are companies that use blockchain technology to create a decentralized and distributed version of the internet. Web3 startups often issue their own tokens as a way to raise funds and reward their users and investors. These tokens are also a means of exiting the investment earlier than traditional routes, such as an initial public offering (IPO) or a merger and acquisition (M&A).
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However, on Feb. 16, 2024, the Japanese government took a major step towards changing this situation. Prime Minister Fumio Kishida’s cabinet approved the text of a bill that seeks to partially amend the country’s industrial competitiveness enhancement act, according to a statement published on the Ministry of Economy, Trade, and Industry’s website. The legislation stipulates that “actions will be implemented to include cryptoassets in the roster of assets permissible for acquisition and retention by investment limited partnerships,” alluding to a mechanism employed by venture capital firms to procure capital for investments.
The government intends to present the bill for discussion in the ongoing session of the Diet, Japan’s parliament. If the amendment is approved, it would open up Japan’s investment sector to greater exposure to digital assets. This would also align with Kishida’s agenda for reinvigorating Japan’s economy, which includes support for the growth of Web3 firms.
Why is this important for Japan and the crypto industry?
The proposed legislation is a significant milestone for both Japan and the crypto industry, as it would enable more capital inflow and innovation in the digital asset space. Japan is already one of the largest and most active markets for cryptocurrencies, with over 30 licensed crypto exchanges and millions of users. According to a report by Coinhills, Japan ranked second in the world in terms of Bitcoin trading volume in 2023, behind only the United States.
However, Japan also faces some challenges and competition in the crypto sector, such as strict regulations, high taxes, and rising interest from other countries, such as China, South Korea, and Singapore. By allowing investment funds to hold crypto, Japan would boost its attractiveness and competitiveness as a hub for crypto innovation and entrepreneurship. It would also create more opportunities and incentives for web3 startups to launch and grow in Japan, as they would have access to more funding and support from local investors.
Moreover, the legislation would also benefit the crypto industry as a whole, as it would increase the demand for and adoption of cryptocurrencies, especially Bitcoin. Bitcoin is the most popular and dominant cryptocurrency in the market, with a market cap of over $1 trillion as of Feb. 20, 2024. Bitcoin is also considered a store of value and a hedge against inflation and currency devaluation, as it has a limited supply of 21 million coins and a decentralized and transparent network.
Bitcoin’s price has been on a bullish trend since late 2023, reaching new record highs in 2024. On Feb. 18, 2024, Bitcoin hit an all-time high of $57,489, according to CoinMarketCap. One of the main drivers of this rally was the increasing institutional and corporate adoption of Bitcoin, as more investors and companies recognized its potential and value. Some of the notable examples of this trend include:
Tesla, the electric car maker led by Elon Musk, announced in February 2024 that it had bought $1.5 billion worth of Bitcoin and that it would accept it as a payment method for its products.
MicroStrategy, a business intelligence firm, has been accumulating Bitcoin since August 2023 and now holds over 90,000 Bitcoins, worth over $5 billion.
Square, a payment company founded by Twitter CEO Jack Dorsey, invested $50 million in Bitcoin in October 2023 and another $170 million in February 2024.
PayPal, the online payment giant, launched a service in November 2023 that allows its users to buy, sell, and hold Bitcoin and other cryptocurrencies on its platform.
Mastercard, the global payment network, announced in February 2024 that it would support selected cryptocurrencies on its network later this year.
BNY Mellon, the oldest bank in the United States, revealed in February 2024 that it would offer custody and administration services for cryptocurrencies to its clients.
BlackRock, the world’s largest asset manager, confirmed in February 2024 that it had started to dabble in Bitcoin as part of its portfolio diversification strategy.
These developments indicate that Bitcoin is becoming more mainstream and accepted as a legitimate and valuable asset class, which could attract more investors and users in the future. However, Bitcoin also faces some challenges and risks, such as regulatory uncertainty, volatility, scalability, security, and environmental concerns. Therefore, Bitcoin investors and enthusiasts should be aware of these factors and do their own research before making any decisions.
The legislation that Japan is proposing to allow investment funds to hold crypto would not only affect Bitcoin but also other cryptocurrencies and crypto-related products, such as altcoins, stablecoins, and exchange-traded funds (ETFs).
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Altcoins are cryptocurrencies that are alternatives to Bitcoin, such as Ethereum, Litecoin, Ripple, and Cardano. Altcoins often have different features and use cases than Bitcoin, such as smart contracts, decentralized applications, and faster transactions. Altcoins usually follow the price movements of Bitcoin, but they can also have their own dynamics and trends, depending on their fundamentals, news, and sentiment. Altcoins tend to be more volatile and risky than Bitcoin, but they can also offer higher returns and opportunities for diversification.
Stablecoins are cryptocurrencies that are pegged to a fiat currency, such as the US dollar, the euro, or the yen, or to a commodity, such as gold or silver. Stablecoins aim to provide stability and liquidity to the crypto market as they reduce the volatility and exchange rate risk of cryptocurrencies. Stablecoins can also facilitate cross-border payments, remittances, and e-commerce, as they offer faster and cheaper transactions than traditional methods. Some of the most popular stablecoins include Tether, USD Coin, Dai, and Paxos Standard.
ETFs are investment products that track the performance of an underlying asset, such as a stock, a bond, a commodity, or a cryptocurrency. ETFs allow investors to gain exposure to a certain market or sector without having to buy or hold individual assets. ETFs are traded on regulated exchanges and offer advantages such as low fees, high liquidity, transparency, and tax efficiency. However, ETFs also have drawbacks, such as tracking errors, management fees, and market risks.
There are currently no crypto ETFs available in Japan, but there are some in other countries, such as Canada, Switzerland, and Germany. Crypto ETFs are seen as a way to bring more institutional and retail investors into the crypto space, as they offer a convenient and regulated way to access the crypto market. However, crypto ETFs also face some challenges and hurdles, such as regulatory approval, custody, and security issues.
Conclusion
Japan is moving closer to allowing investment funds to hold crypto, which could have a positive impact on the crypto industry and the Japanese economy. The legislation would enable more capital inflow and innovation in the digital asset space, as well as increase the demand for and adoption of cryptocurrencies, especially Bitcoin. However, the legislation also poses some challenges and risks, such as regulatory uncertainty, volatility, scalability, security, and environmental concerns. Therefore, investors and users should be cautious and informed before entering the crypto market.
What are some other countries that have adopted cryptocurrencies?
Some other countries that have adopted cryptocurrencies are Nigeria, Vietnam, Ukraine, and the United States, according to the 2023 Global Crypto Adoption Index by Chainalysis. These countries rank among the top five in the index, which measures the usage of different types of cryptocurrency services and protocols by average people.
The index considers factors such as transaction volume, web traffic, peer-to-peer payments, and innovation. Nigeria and Vietnam are examples of developing countries where cryptocurrencies are used as an investment tool and a hedge against inflation and currency devaluation. Ukraine and the United States are examples of countries where cryptocurrencies are used for innovation and entrepreneurship, as well as for diversification and speculation. You can see the full index rankings for all 154 countries in the report by Chainalysis or in the chart by Statista.
What is the most popular cryptocurrency in Nigeria?
How do Nigerians buy and sell cryptocurrencies?
Nigerians can buy and sell cryptocurrencies through various platforms and services, such as peer-to-peer (P2P) trading, online exchanges, and crypto wallets. However, due to the Central Bank of Nigeria’s (CBN) ban on banks and financial operators from processing transactions for cryptocurrency exchanges, Nigerians cannot use naira-domiciled cards or bank accounts to buy or sell crypto. Instead, they have to use international cards, alternative payment methods, or P2P platforms that allow them to trade directly with other users.
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Some of the popular platforms and services that Nigerians can use to buy and sell cryptocurrencies are:
Paxful: Paxful is a global P2P platform that connects buyers and sellers of Bitcoin and other cryptocurrencies. Paxful supports over 300 payment methods, including bank transfers, mobile money, gift cards, and cash. Paxful also has a Nigerian naira (NGN) wallet that allows users to store, send, and receive naira instantly.
Binance: Binance is one of the largest and most popular crypto exchanges in the world, offering a wide range of crypto assets, trading pairs, and features. Binance also has a P2P platform that supports NGN and other fiat currencies, as well as multiple payment options, such as bank transfers, cards, and mobile money.
Luno: Luno is a crypto exchange and wallet service that operates in Nigeria and other countries. Luno allows users to buy, sell, and store Bitcoin, Ethereum, and other cryptocurrencies using NGN and other fiat currencies. Luno also offers a P2P platform that enables users to trade crypto directly with each other.
Quidax: Quidax is a crypto exchange and wallet service that is based in Nigeria and serves African users. Quidax allows users to buy, sell, and store Bitcoin, Ethereum, Ripple, and other cryptocurrencies using NGN and other fiat currencies. Quidax also supports P2P trading and multiple payment methods, such as bank transfers, cards, and USSD.
These are some of the examples of how Nigerians can buy and sell cryptocurrencies, but there may be other platforms and services that are not mentioned here. Before choosing any platform or service, users should do their own research and due diligence, as well as comply with the local laws and regulations. Cryptocurrencies are volatile and risky, and users should only invest what they can afford to lose.
