Japan's Slow Crypto Approval Processes, 20% Tax Proposed Stifle Sector Growth: Experts

Japan’s regulatory framework for cryptocurrency is under scrutiny as experts highlight how its sluggish approval processes are hampering the sector’s growth. Maksym Sakharov, co-founder and CEO of Web3 firm WeFi, argues that Japan’s “slow, prescriptive, and risk-averse” regulatory culture is a primary barrier to innovation, even as the government proposes a 20% flat tax on crypto gains. According to Sakharov, the current system forces startups and liquidity providers to seek listings abroad, eroding Japan’s potential to lead in crypto adoption [1].

The approval process for token listings or initial exchange offerings (IEOs) in Japan involves a two-step regulatory pathway: initial self-regulatory review by the Japan Virtual and Crypto Assets Exchange Association (JVCEA), followed by final oversight by the Financial Services Agency (FSA). This process can extend go-to-market timelines to 6–12 months, delaying product launches and draining startup resources. Sakharov emphasized that repeated bottlenecks in JVCEA’s token screening, IEO white paper vetting, and product change notifications to the FSA often require multiple revisions, creating a system “designed to avoid downside, not to accelerate innovation” [1].

Comparisons with other jurisdictions reveal Japan’s shortcomings. While Singapore and the United Arab Emirates have introduced more agile frameworks, Japan’s pre-approval model contrasts with South Korea’s VAUPA, which focuses on ongoing exchange obligations rather than rigid external approvals. These differences enable faster listings in competing markets, further incentivizing Japanese crypto firms to scale overseas. Sakharov warned that the proposed tax and reclassification of crypto as a financial product would not resolve these issues unless approval cultures evolve. “Culture eats tax cuts for breakfast,” he asserted, stressing that regulatory efficiency—not tax policy—will determine Japan’s competitive edge [1].

To address these challenges, Sakharov proposed reforms such as “time-boxed, risk-based approvals,” functional sandboxes supporting experimentation in staking and governance, and proportional disclosure requirements. Without such measures, he cautioned, domestic projects will continue to prioritize foreign markets due to the uncertainty and delays inherent in Japan’s system. This trend could undermine Japan’s historical reputation as a blockchain innovation hub, as global investors increasingly favor jurisdictions with clearer regulatory pathways [1].

The critique aligns with broader concerns about regulatory efficiency in fintech. While Japan’s approach prioritizes risk mitigation, the lengthy approval timelines and inflexible processes deter both domestic and international players. Experts stress that without reimagining its framework, Japan risks ceding ground to more agile markets, particularly as institutional investors prioritize jurisdictions with predictable compliance standards.

Source: [1] [Japan’s ‘slow’ approval culture stifles crypto adoption: Expert] [https://coinmarketcap.com/community/articles/6884cef47bcc423cceef7492/]
[2] [Japan’s regulatory landscape under scrutiny] [https://www.coingecko.com/en/coins/yield-optimizer-eth]