Author: Donny, Eaton, Dorit

Source: Beosin

Tokyo and Kyoto are two of the most representative cities in Japan.

Tokyo is the capital of Japan. It is the center of Japanese politics, economy, education, and culture, and also an important hub for international exchange and innovation. Most of Japan's Web3 cryptographic organizations and active VCs are located in this bustling city.

Kyoto has a long history and rich cultural heritage. With its ancient charm, delicacy, and attention to detail, Kyoto, known for its subtle and restrained aesthetics, has become lively again because of encryption.

In an era where technological advancements are shaping the future of economies around the world, Japan is taking a strategic leap towards the Web3 revolution. Recognizing the transformative potential of blockchain technology, cryptocurrencies, and decentralized internet, Japan is wholeheartedly placing cities like Tokyo and Kyoto at the forefront of this digital revolution. 

Tokyo vs Kyoto, the Cryptographic Twin Cities of Japan

At the end of June this year, the largest international cryptocurrency summit in Japan, IVS Crypto 2023, was held in Kyoto. Many well-known investment institutions set up booths at the venue to connect with emerging global Web3 startups. This has made Kyoto, the ancient capital, come alive again because of encryption.

IVS Crypto 2023 Conference

There will be several Japanese-themed events during the three-day conference. The Web3 Shining Golden Pavilion sponsored by Beosin was held at Kinkaku-ji Temple on June 28, attracting many local Japanese teams to participate. In the evening, Beosin hosted the "Web3 GEISHA ROOFTOP PARTY" high-end cocktail party in Kyoto, providing an important platform for international blockchain projects and investors to communicate. We also witnessed the perfect integration of tradition and innovation in Kyoto on this night.

Beosin BD representative at the Kyoto event

After the successful IVS Crypto event in Kyoto, Tokyo will also host the WebX Conference, the first large-scale international blockchain summit in the second half of this year, from July 25-26. This conference aims to bridge the gap between Web2 and Web3, Japanese and English, and Japan and other parts of the world. Top global Web3 entrepreneurs, investors, and developers will gather together to discuss how to integrate decentralized technologies like blockchain into society.

It is worth mentioning that Beosin has reached a strategic cooperation with Cryptogram Venture (CGV), the organizer of the second Tokyo Web3 Summer Hackathon. Beosin will provide free authorization for the use of the Beosin VaaS smart contract formal verification platform and 30 minutes of on-site & remote guidance for all projects participating in the Tokyo Web3 Summer Hackathon. This cooperation aims to provide security support for blockchain projects and developers worldwide to promote the development and application of blockchain technology.

Web3 Cryptocurrency Institutions "Landed" in Tokyo and Kyoto

It can be seen that cities such as Tokyo and Kyoto in Japan are increasingly welcoming Web3.

For example, recently, Sony Network Communications, a subsidiary of Sony Group, has collaborated with Astar Network to launch a Web3 incubation program. This program is used to incubate projects with practicality in NFTs and decentralized autonomous organizations (DAOs), aiming to explore how blockchain technology can solve various industry problems.

Similarly, automotive giant Toyota is also conducting in-depth research on use cases for blockchain technology. In early April, the company held a comprehensive Web3 hackathon on Astar Network to help Toyota develop more efficient team management strategies and optimize its business decision-making processes. Regarding these developments, Sota Watanabe, the founder of Astar Network, said: "Many Japanese companies, especially Toyota and Sony, want to work on Web3. I think the reason is simple: we completely missed the Web2 revolution, so Web3 is the next major opportunity for the Japanese economy."

In the Tokyo and Kyoto regions, we also see some growing Web3 cryptocurrency institutions. Here are some representative institutions:

Web3 Enterprises/Institutions in Tokyo

1. HashPort

HashPort Group was founded in 2018 with a vision for digital asset digitization and has accumulated a wealth of achievements in blockchain technology. HashPort currently has three major businesses: HashPort, which provides blockchain technology consulting and solutions; HashPalette, which provides NFT-related technical support; and HashBank, which provides financial infrastructure services. In April 2023, HashPort completed a Series C financing round of over 8.9 million USD.

2. KEKKAI

KEKKAI is a startup focused on enhancing the security of cryptocurrency asset transactions. Although KEKKAI was officially established in early 2023, its wallet security plugin was officially launched in December 2022. In February 2023, KEKKAI completed a pre-seed financing round of 50 million JPY, with Skyland Ventures as the investor. This financing will be used for product feature improvements and the expansion of security services.

3. Skyland Ventures

Skyland Ventures is a comparatively active local cryptocurrency fund in Japan. In the blockchain security sector, it has invested in KEKKAI and GoPlus. In the cross-chain sector, it has invested in Orbiter Finance. In terms of infrastructure, it has invested in Ethereum Layer 2 Taiko, NFT data analysis platform NFTGO, and MEV mitigation provider Wallchain. In April 2023, Skyland announced the completion of 5 billion JPY fundraising for its fourth fund and the establishment of a seed fund dedicated to Web3 investments.

4. MZ Web3 Fund

MZ Web3 Fund, established by the former friend of Japanese Musk, Yuu Maesawa, focuses on Web3 project investment and is the most active crypto fund in Japan. MZ Web3 Fund has invested in 24 startup projects in the Web3 field, including decentralized storage project SINSO, payment tools Slash and Transak, development community WEB3 DEV, game public chain Oasys, and Web3 user growth platform Aki Network. MZ Web3 Fund will provide community resources through MZ Club and MZ DAO to help these projects expand rapidly in the Japanese market.

Web3 Companies/Institutions in Kyoto

1. QURAS

QURAS was established in 2017 and has a branch office in Kyoto, Japan. It is committed to providing privacy-preserving blockchain solutions for enterprise clients, with application scenarios covering digital asset trading, supply chain management, healthcare, and financial services. In 2018, QURAS also launched the mobile wallet Quras Wallet and partnered with multiple exchanges including Uniswap, bithumb, and Mooniswap. In 2019, QURAS completed a Series A financing of $16 million, with participation from Roark Fund, SEB Venture Capital, and other institutions.

2. SORAMITSU

SORAMITSU was established in 2016 and focuses on research and development of blockchain technology, aiming to provide high-quality blockchain solutions for enterprises, governments, universities, and communities. SORAMITSU has many widely recognized projects in the cryptocurrency field, including Bakong and Hyperledger Iroha. In 2016, SORAMITSU developed the project Hyperledger Iroha and contributed it to the Hyperledger project of the Linux Foundation, providing assistance for enterprises and financial institutions to manage digital assets.

3. NEO KYOTO NFT ARTs

NEO KYOTO NFT ARTs is a Web3 education project co-developed by Hua Ge'er Holdings Co., Ltd. and SMBC Nikko Securities Inc. The project aims to showcase and sell NFT art created by students in Kyoto, involving the future space and content of Kyoto. A portion of the sales revenue will be donated to Kyoto City for educational purposes. The project aims to establish a creative ecosystem that integrates NFT art with urban development.

4. Bar Krypto

Bar Krypto is a cryptocurrency bar in Kyoto, providing a place for digital nomads to passionately discuss Web3. Currently, Bar Krypto operates on a membership system, where customers can purchase their membership NFT on OpenSea to become a member. Members can name cocktails and participate in basement DIY renovations and event planning.

The Unavoidable Hacker Ghost in the Japanese Crypto Field

Japan was once a pioneer in the cryptocurrency field but quickly fell victim to hacker attacks.

In 2014, the Japanese exchange Mt. Gox was attacked by hackers. Then, in early 2018, hackers struck again, stealing over $500 million from the Japanese exchange Coincheck, severely hindering Japan's crypto development.

These two hacking incidents served as a significant reminder to regulatory authorities. After the events, Japan required the separation of customer assets and exchange assets, with a majority of exchange assets being stored in cold wallets.

As a result, when FTX collapsed earlier this year, Japan's regulatory approach demonstrated its advantages.

The Chief FinTech Officer of the Financial Bureau, the government agency responsible for regulating cryptocurrencies, Ryosuke Ushida, stated: "The assets of FTX Japan's Japanese customers are likely to be returned without a significant impact from the global bankruptcy filing under Chapter 11 of the US Bankruptcy Code." It can be seen that Japan's cryptocurrency asset regulation policy has played a significant role in protecting the assets of local Web3 users.

Japan at the Forefront of Cryptocurrency Asset Regulation

In 2016, Japan revised the Payment Services Act and the Financial Services Act, and officially established regulations for cryptocurrencies in 2017. On the one hand, cryptocurrencies are classified as "cryptocurrency assets" under the Payment Services Act. Operators engaged in the purchase, sale, or intermediary of cryptocurrency assets, as well as those managing cryptocurrency assets for the benefit of others, must register as cryptocurrency asset trading services.

On the other hand, the Financial Services Agency, a financial regulatory body in Japan, regulates cryptocurrency exchanges and considers transferable interests of blockchain-based partnerships as securities (i.e. ordinary partnership securities that are transferred electronically). Under the Financial Instruments and Exchange Act (FIEA), businesses that provide or act as intermediaries for derivative products related to cryptocurrency assets are categorized as Class 1 financial instrument businesses. Such businesses constitute investment advisory or investment management businesses and require registration under the FIEA.

As for stablecoins, the Japanese government classifies them as cryptocurrency assets or a means of payment in remittances, depending on whether they can be exchanged for legal tender. In addition, as NFTs are not currently recognized as a means of payment, no specific regulations have been established under the existing regulatory framework. However, the Financial Services Agency has included the establishment of a regulatory framework for NFTs in its agenda.

Nevertheless, Japan continues to experiment and adjust its regulations in the process of cryptocurrency asset regulation. With the development of the cryptocurrency field, related policies will also gradually evolve.

In April 2023, the Web 3.0 project team of Japan's ruling party released a whitepaper proposing recommendations to promote the development of Japan's cryptocurrency industry. In June 2023, the "Financial Settlement Act Amendment Bill" in Japan was voted through in the House of Councillors, making it the first country in the world to enact a stablecoin law.

Project Team Secretary General Akihisa Shiozaki pointed out in a recent interview, "The cryptocurrency industry has always been driven by early adopters, but now it will shift towards mass adoption." He mentioned that large companies in Japan have already started entering the market, with mobile operator NTT Docomo recently committing to invest up to 600 billion yen ($4 billion) in Web3 infrastructure. Moreover, major financial institutions are also seeking to issue stablecoins to digitalize the national economy.

Final Thoughts

It is evident that Japan's embrace of cryptocurrencies and Web3 measures is a strategic move aimed at injecting new vitality into the economy. If Japan wants to leverage the emergence of Web3 to drive new economic growth, it must overcome numerous obstacles. Whether in crypto-friendly cities like Tokyo or Kyoto, there is a need for the birth of truly groundbreaking Web3 companies that can showcase the potential of blockchain technology and serve as role models to inspire other Japanese entrepreneurs. On the other hand, we can also see that the country's Web3 policies, corporate collaborations, and regulatory progress are gradually paving the way for local Web3 development.