Japan is losing its place as the gaming capital of the world due to crypto hostility
A marked hostility to new and emerging Web3 technologies such as cryptocurrencies risks costing Japan its place as the gaming capital of the world. We’re getting dangerously close to the point of no return, and here’s why.
No one can be sure where the country’s antagonism towards crypto originated or why it still persists even after the non-fungible token (NFT) and crypto “boom” of 2021, which took off in a big global way and had officials in the US and Europe to go back on their original antipathy for the room, and finally opened up to regulations. The White House just released its first crypto regulatory framework in September 2022, and the European Parliament Committee followed up in October 2022 by approving the Markets in Crypto-Assets framework, also known as MiCA, in a landslide vote. As the first European crypto policy, the much talked about MiCA text represents revolutionary progress towards what many consider to be the future of the financial world.
However, Japan has a completely different attitude.
We all know that Japan is home to gaming giants like Nintendo and Sega and has been for decades, with triumphs like Super Mario, Sonic the Hedgehog, Sega Mega Drive and Game Boy. But to stay on top of the game (pun absolutely intended), the sector needs to be able to change consistently and quickly with the times, not stay stuck where it was when it first gained recognition. Gaming is a highly creative space and has always had the technology to support its extraordinary potential. But to do so, it must be able to keep up with new and evolving innovations, or it will become stagnant and dull.
Related: GameFi developers could face heavy fines and hard time
GameFi is a growing area of interest in the industry with enormous potential. But when you look closer, there are very few Japanese companies developing the GameFi sector into what it will surely become in a few years to a decade. And if that doesn’t change soon, the entire industry will be at risk.
The crypto and technology worlds are two of the main stages of exciting and rapidly developing advances happening in modern times, and in Japan they are held hostage by crucial elements such as taxation and a complicated screening process.
In Japan, there is no need to properly account for crypto assets, and none of the auditors want to audit crypto assets. Due to strict listing rules drawn up by the Financial Agency, the process of listing a coin in Japan can be confusing and frustrating to a fault. But when time is money for any entrepreneur with a brilliant idea, waiting six months for a token to appear is unnecessarily discouraging.
Then there is tax. In Japan, token issuers are taxed on unrealized assets at the end of the fiscal year, regardless of whether they have enough fiat currency to cover high taxes or not. And while non-crypto stock profits are taxed at a flat 20% rate, crypto earnings are subject to a whopping 55% tax rate, a difference of 35 points.
Related: The Feds are coming for the metaverse, from Axie Infinity to Bored Apes
As Japan’s reputation falters, other countries will be waiting with open arms to accept its bright minds and fearless entrepreneurs who just can’t understand why their country turned its back on them. Europe is full of investor-friendly nations with rational regulatory systems, such as the Netherlands. With the new MiCA legislation as close as they are to being widely implemented, it’s not far-fetched to wonder if other countries would be better suited to house Japan’s brain drain.
We can actually see small improvements in the right direction. The government may be inclined to soon ease the current burdensome listing rules and allow the country’s $1 trillion crypto trading market to flourish a little more easily, with exchanges able to “list over a dozen coins at once and without a lengthy screening process.” And since taking office in 2021, Japan’s Prime Minister Fumio Kishida has prioritized Web3 development as a means of “economic revitalization,” meaning we could witness a marked shift in how the country both regulates crypto and supports the growth of the Web3 sector as a whole .
But the clock is ticking, and if only time will tell how Japan’s role in the gaming sector will affect the economy in the future, it’s hard to be overwhelmingly optimistic.
Shinnosuke “Shin” Murata is the founder of blockchain game developer Murasaki. He joined the Japanese conglomerate Mitsui & Co. in 2014 with car financing and trading in Malaysia, Venezuela and Bolivia. He left Mitsui to join a second-year startup called Jiraffe as the company’s first sales representative, and later joined STVV, a Belgian soccer club, as its head of operations, helping the club create a community token. He founded Murasaki in the Netherlands in 2019.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
