- Startups flee Japan as regulatory delays crush crypto innovation potential.
- Tax reforms won’t matter without fixing Japan’s broken approval pipeline.
- Global rivals outpace Japan with faster, flexible crypto listing systems.
Crypto startups are steadily shifting away from Japan, and the root cause is not taxation. Maksym Sakharov, co-founder and CEO of decentralized onchain bank WeFi, says the core problem is Japan’s outdated and sluggish approval system.
According to Sakharov, the 55% progressive tax on crypto may be painful, but it is no longer the main reason innovation is leaving the country. Instead, an inflexible and risk-averse regulatory culture is driving startups away, with token listings and product releases tremendously behind schedule.
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In Japan, listing a token and initiating an Initial Exchange Offering (IEO) involves two steps. First, the Japan Virtual and Crypto Assets Exchange Association (JVCEA) reviews the application, and then the Financial Services Agency (FSA) renders the final verdict. This process may take six months to a year or more.
These extended timelines result in wasted resources and mounting costs for builders. As it currently averages between one and four years to have a token listed in Japan, many Japanese-based crypto teams are choosing to list their tokens abroad to escape perpetual revisions by the regulators.
Other Markets Outpace Japan With Faster and Flexible Frameworks
While Japan debates introducing a 20% flat tax on crypto gains, Sakharov argues that tax reform alone will not fix the underlying issue. The approval culture is focused on minimizing risk rather than promoting innovation.
In comparison, countries like the United Arab Emirates and Singapore have proven to be more appealing. UAE has quicker channels, and Singapore adopts transparent and systematic approval channels. In South Korea, they have faster token listing due to focusing on compliance in real time as opposed to initial review.
Sakharov asked Japan to adopt time-limited claims-based approval windows. He also proposed a regulatory sandbox in which staking and governance may be experimented with, as well as proportional disclosure requirements for various project sizes.
Japan will lose more projects abroad unless the system of approving projects in practice is changed. Despite efforts to revise crypto taxation, the real issue remains unresolved, and developers continue to face long delays in launching within the country.
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