Japan’s Web 3 Revolution: Uncovering the Island Nation’s Unique Path Amidst Global Chaos
March 21, 2023 | Elisabeth Kim | SojuDAO
2022 was a cold year for Web 3, with bear market trends including the bankruptcy of FTX and the plunge of cryptocurrency prices. If you followed news outlets like CNBC, which reported an estimated $2 trillion loss in the crypto crash last year, and National Public Radio, which called it a “full-on meltdown,” you might have believed that blockchain currency was on its way to irrelevance.
Ray Ahn, a Web 3 advisor, believes that the market’s dramatic downturn could actually be a catalyst for innovation and development, stating “That’s when the ‘real developments’ happen anyways.” In other words, periods of low prices and reduced investor interest can give rise to new ideas and technologies that ultimately drive the market forward. This was his response when asked if he saw a reaction to the bear market during this year’s ETH Tokyo, which was held on April 14th-16th. All attendees who were asked the same question responded “No,” and added that ETH Tokyo demonstrated a “hopeful” and “optimistic” vibe within the country’s Web 3 communities.
Japan’s blockchain market remained relatively unbothered by the bear market situation that affected most of the world, primarily because they did not have as much involvement in the market after early 2018. Japan suffered early from the hacking of Coincheck, which resulted in a 400K illegal transaction of NEM (New Economy Movement) coin. The incident prompted the Payment Services Act, which requires cryptocurrency exchanges to be registered with the Financial Services Agency, meet certain security and audit criteria, and undergo on-site inspections for compliance.
Instead of allowing a massive influx of cash-grab projects with high-security risks, Japan has maintained high tax rates on cryptocurrency income and only permitted projects that were dedicated enough to launch in an unfavorable climate. While keeping the barriers to entry high and the market cold, the Japanese parliament worked on developing a safer environment for consumers. The effectiveness of strict regulations was demonstrated during a period when FTX filed for bankruptcy, freezing $8 billion worth of assets. In Japan, FTX customers were able to withdraw their assets relatively quickly compared to customers in other countries, indicating the positive impact of regulations segregating crypto assets from other types of assets.
Although Japan’s cryptocurrency market hasn’t soared like others, that doesn’t mean other areas of Web 3 weren’t in development. In fact, Japan’s Web 3 ecosystem has had a notably vibrant NFT market from observers at ETH Tokyo, partially due to its competitive IP rights. The island nation’s NFT industry is expected to grow by 53.0% on an annual basis (CAGR of 38.7%, 2022–2028), as Prime Minister Kishida Fumio expressed interest in using revenues from NFTs to revitalize troubled regions of the country. He added that the Japanese government could employ tools such as non-fungible tokens (NFTs) and decentralized autonomous organizations (DAOs). Soramitsu, a leading company specializing in the development of blockchain solutions for businesses, governments, and other organizations, landed a massive deal with the National Bank of Cambodia to build Bakong, a financially inclusive and secure alternative to paper banknotes designed to function within the parameters required by the banking system.
Although opting out of the cryptocurrency frenzy may have led to several missed opportunities or failures, nobody seemed worried that Japan might be behind or lost in the Web 3 game. After attending several ETH Tokyo events, SojuDAO Founder Jordan Smith testified to a highly-functioning ecosystem that survived without being in touch with the rest of the world, comparing it to a beheaded chicken that managed to run in the right direction.
“It’s like a chicken that ran with its head cut off, but it’s been running straight.”
The country with the sparsest cryptocurrency market may have been cooking something up behind the highest walls of entry, as a proposal by Japan’s ruling Liberal Democratic Party’s Web 3 project team states that it is “the time for the public and private sectors to gather their knowledge and expertise to make Japan the global hub of ‘responsible innovation.’”
Japan’s culture is often characterized as being quiet, reserved, and conservative, with a strong emphasis on respecting tradition and maintaining harmony. Rather than being driven by disruption and experimentation, innovation in Japan is often more incremental, focusing on improving existing products and processes rather than developing entirely new ones. This has helped Japanese companies build a reputation for quality and reliability, and anticipation for what unique role Japan will play in the Web 3 space is growing.
35 Somaeks were at ETH Tokyo and the turnout for Jordan’s event Luma, partnered with OrangeDAO and DeStore was amazing! On behalf of our founder, thank you to everyone who showed their fun. 🙂
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