Japan’s sluggish and risk-averse regulatory system is the key factor stifling crypto adoption and innovation, not its tax policy. That’s the view of Maksym Sakharov, co-founder and CEO of WeFi, a decentralised on-chain banking platform.
Speaking to Cointelegraph, Sakharov argued that Japan’s proposed 20% flat tax on crypto gains would do little to change the exodus of startups and capital. Instead, he pointed to the country’s rigid approval process, which slows down token listings and exchange operations.
Maksym Sakharov, co-founder and CEO of WeFi
“The 55% progressive tax is painful and very visible, but it’s not the core blocker anymore,” said Sakharov. “The FSA/JVCEA pre-approval model and the absence of a truly dynamic sandbox are what keep builders and liquidity offshore.”
Approval Delays and Regulatory Red Tape
Japan’s token listing process is uniquely slow and cumbersome. It involves a two-step regulatory process: initial review by the self-regulating Japan Virtual and Crypto Assets Exchange Association (JVCEA), followed by final approval from the Financial Services Agency (FSA).
Sakharov explained that this multi-layered process extends the go-to-market timeline by 6 to 12 months, sometimes more. “It burns runway and forces many Japanese teams to list first overseas,” he added.
Even relatively simple actions like submitting a white paper for an Initial Exchange Offering (IEO) or notifying the FSA about a product change often require multiple rounds of revision. “The process is designed to avoid downside, not to accelerate innovation,” Sakharov said, criticising its defensive, rather than enabling, approach.
Falling Behind Regional Competitors
Compared to other global crypto hubs in Asia, Japan is falling behind. Countries like the UAE, Singapore, South Korea, and Hong Kong have all adopted more agile regulatory frameworks that balance compliance with innovation.
“Singapore is strict too, but it provides clearer pathways,” Sakharov noted. “The UAE is faster on average. South Korea focuses on ongoing obligations rather than pre-approval, so listings are typically processed materially faster.”
Hong Kong has also launched the Ensemble Sandbox, a fast-track innovation hub enabling quicker rollout of tokenised projects. In contrast, Japan’s regulatory pipeline continues to act as a bottleneck.
‘Culture Eats Tax Cuts for Breakfast’
Despite plans to introduce a flat 20% tax on crypto gains and reclassify digital assets as financial products, Sakharov believes these reforms won’t move the needle without cultural change at the regulatory level.
“Culture eats tax cuts for breakfast,” he warned, highlighting that even the best policies can fail without a shift in mindset. He urged Japanese regulators to adopt a “time-boxed, risk-based approval” system and roll out a functional sandbox to support innovation in areas like staking and governance.
He also called for proportional disclosure requirements that align with project size and maturity. Without such reforms, Japanese crypto startups will likely continue scaling abroad, not because of tax burdens, but due to frustration over long approval delays and uncertainty.
Asia’s Tokenisation Boom Highlights Japan’s Missed Opportunity
As Asia surges ahead in the global tokenisation race, Japan’s overly cautious stance is increasingly out of sync. Startale Group’s Maarten Henskens recently stated that Asia’s leadership in tokenisation is drawing increased interest from global investors.
Hong Kong and the UAE have already become magnets for fintech and crypto startups, thanks to their clarity, speed, and openness to experimentation. While Japan is attempting to build long-term regulatory depth, its slow pace is pushing away the very innovators it aims to support.
Until Japan streamlines its approval system and fosters a culture that embraces calculated risk, it risks being left behind in the Web3 revolution.
