NFTs, DAOs can boost ‘Cool Japan’ program, Japan PM says

Fumio Kishida at the 48th G7 summit in Schloss Elmau, Germany in June 2022, tags: cool - CC BY-SA

Japanese prime minister Fumio Kishida has said the country could optimize the use of non-fungible tokens (NFTs) and decentralized autonomous organizations (DAOs) to support “Cool Japan,” a national initiative to showcase Japan’s culture and innovations.

“If you consider DAOs, people who are interested in the same social issues can form a new community,” Kishida said. “NFTs can also be used to diversify the income of creators and maintain highly loyal fans.”

Kishida’s statement was a response to a questioning round from Masaaki Taira, a Liberal Democratic Party member, during the Budget Committee of Japan’s House of Representatives. Taira leads the task force on the development of Web3 policy.

He oversees coordination with Japanese tax authorities and research about digital currency. Last November, the Bank of Japan announced plans to run a pilot program for a digital yen in spring 2023.

“I think that these types of blockchain technology and technology using Web3 are effective in solving the various problems we have.”

Masaaki Taira, Member of Japan’s Liberal Democratic Party

Since taking the leadership position in October 2021, Kishida has planned to invest in Web3 services to transform Japan into a new-age digital economy.

Last September, his administration began granting NFT rewards for regional authorities who use digital technology to resolve social problems within their respective jurisdictions.

Kishida also signaled that he wanted to digitalize national identity cards. In addition to NFTs, the expansion of Web3 services in Japan will also include the metaverse sector, which shows a high economic growth potential.

Since Kishida took over the office, Japan’s crypto users have increased. The country also tackled several crypto issues, including the initiation of repayment procedures for the defunct Shibuya-based crypto exchange Mt. Gox after years of legal battles. Japan also recently reintroduced crypto ATMs in the country.

Kishida shares a similar opinion with former primer minister Yoshihide Suga who suggested tax for Bitcoin transactions in Japan. Last August, Japanese crypto advocacy groups demanded a 20 percent separate tax on crypto earnings for retail investors. Many of them currently pay up to 55 percent in tax.

Several business entities in Japan have also incorporated blockchain into their daily operations, particularly gaming companies. For example, Metal Gear Solid developer Konami added 13 new job posts to support its blockchain ventures last year.

Japan pushing for crypto regulation

Following the collapse of the crypto exchange FTX, Japanese financial authorities have urged global regulators to manage the crypto industry the way they manage the traditional financial sector.

Japanese Financial Services Agency’s Strategy Development and Management Bureau deputy director-general Mamoru Yanase said the root cause of FTX’s implosion was not crypto or blockchain technology.

He instead blamed “loose governance, lax internal controls and the absence of regulation and supervision” for the situation. In the FTX case, alleged poor management practice led to the company’s demise, resulting in millions of users losing access to their funds.

Yanase said regulators must be stern in demanding consumer protection measures from crypto entities. Regulators must also design the right approach for tight governance, internal management controls and money laundering prevention.

According to Yanase, FTX’s subsidiary in Japan is expected to resume withdrawals this month, meaning that Japanese customers can receive their money back. Yanase explained that it was possible because the “client’s assets have been properly segregated” from FTX Japan.

The U.S. court in charge of the FTX case granted the sale of FTX Japan, among several other subsidiaries. According to a recent report, there were 41 entities interested in acquiring FTX Japan, including financial services firm Monex.