<article>Japan plans to let startups raise money from venture capital firms by selling such digital assets as cryptocurrency instead of stock, providing more funding avenues for up-and-coming companies involved in blockchain technology.</article>

Japan plans to let startups raise money from venture capital firms by selling such digital assets as cryptocurrency instead of stock, providing more funding avenues for up-and-coming companies involved in blockchain technology.
The change would widen the range of assets open to limited partnerships. Venture capital firms typically use limited partnerships to pool capital with other companies for startup investment, capping their exposure to the money they put in.
Japan now restricts limited partnerships to such conventional assets as shares and stock options, and security tokens defined by Japanese securities law. The new rule would add other tokens and crypto assets to that list, expanding an area of investment that has been relatively underdeveloped in the country.
The government plans to submit the necessary legal revisions to the parliament as early as 2024.
Unlike conventional shares, blockchain-based tokens can be created quickly without needing to go through a brokerage or another intermediary.
Fundraising through such digital assets is primarily undertaken by companies involved in next-generation Web3 technologies like blockchain.
Web3 startups worldwide raised $15.1 billion in 2022, 15 times the 2018 total, CB Insights data shows.
Although funding slumped in the latter half of 2022, partly on the collapse of the FTX cryptocurrency exchange, it seems to have bottomed out since the first quarter of 2023.
Several companies in Japan, such as blockchain developer HashPalette, have raised millions of dollars each via token offerings.
But the restrictions blocking limited partnerships from investing in tokens prevented Japanese venture capital firms and institutional investors from participating and reaping the benefits of Web3 companies&#8217; growth.
Startups often issue tokens in Singapore or Dubai. On the venture capital side, Japan&#8217;s Skyland Ventures invested in tokens overseas through a Singapore-based subsidiary.
The Japanese government is considering revising the tax code for fiscal 2024 and beyond to exempt crypto assets and tokens from a tax on unrealized gains based on market value, which has been cited as a reason why some are reluctant to invest in the field.
Venture capital firms have been pushing for this change. &#8220;The revision of the limited partnership law is one of the things we&#8217;ve been waiting for, but it&#8217;s hard to imagine that that on its own will lead to a sharp increase in fundraising via virtual currencies,&#8221; B Dash Ventures said.
Japan also plans to remove restrictions on limited partnerships requiring them to invest more than half their capital domestically, hoping that opening up more investment opportunities will boost their profits and give them more capital to invest in domestic startups.
This article first appeared in <a href="https://asia.nikkei.com/Business/Startups/Japan-to-let-startups-sell-digital-tokens-to-venture-capital-funds">Nikkei Asia</a>.

Japanese VCs have so far been unable to participate in token offerings.

Japan plans to let startups raise money from VC funds by selling digital tokens

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Japan plans to let startups raise money from VC funds by selling digital tokens

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