Japan’s regulatory bottlenecks, not taxes, are the real reason crypto innovation is leaving the country, according to Maksym Sakharov, co-founder and CEO of decentralized onchain bank WeFi.
Sakharov told Cointelegraph that even if the proposed 20% flat tax on crypto gains is implemented, Japan’s “slow, prescriptive, and risk‑averse” approval culture will continue to push startups and liquidity offshore.
“The 55% progressive tax is painful and very visible, but it’s not the core blocker anymore,” he said. “The FSA/JVCEA pre‑approval model and the absence of a truly dynamic sandbox are what keep builders and liquidity offshore.”
Listing a token or launching an initial exchange offering (IEO) in Japan involves a two-step regulatory process. First, a self-regulatory review by the Japan Virtual and Crypto Assets Exchange Association (JVCEA) is needed, followed by final oversight by the Financial Services Agency (FSA).
That process can stretch go-to-market timelines to 6–12 months or more, Sakharov said, adding that it “burns runway and forces many Japanese teams to list first overseas.”
He noted that there have been repeated delays in areas such as JVCEA token screening, IEO white paper vetting and product change notifications to the FSA, which often require several rounds of revision. “The process is designed to avoid downside, not to accelerate innovation,” he noted.
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Japan trails UAE, South Korea and Singapore
Compared to other jurisdictions, Sakharov said Japan lags significantly. “Japan is slower,” he said, noting that a simple token listing can take half a year or longer.
“Singapore is strict too, but it provides clearer pathways… The UAE is faster on average… South Korea’s VAUPA focuses on ongoing exchange obligations rather than a Japan-style external pre-approval, so listings are typically processed materially faster.”
He warned that the proposed 20% tax and reclassification of crypto as a financial product won’t shift the status quo unless the culture around approvals changes. “Culture eats tax cuts for breakfast,” Sakharov said.
As a solution, Sakharov urged regulators to adopt “time‑boxed, risk‑based approvals,” implement a functional sandbox that supports staking and governance experimentation, and introduce proportional disclosure requirements.
He warned that without these changes, domestic crypto projects will likely continue to scale abroad, driven by uncertainty around approvals and long wait times, rather than tax burdens. “It’s about building for 12 months only to be told your token can’t be listed or your product can’t launch.”
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Asia’s lead in crypto draws global attention
Earlier this month, Maarten Henskens, head of protocol growth at Startale Group, said Asia’s leadership in tokenization is drawing growing attention from global investors, with regulatory clarity in the region attracting capital that was once on the sidelines.
Hong Kong has moved swiftly, launching the Ensemble Sandbox as a fast-track regulatory innovation hub. “While Japan is building long-term depth, Hong Kong is showing how agility can bring experimentation to life,” Henskens said.
The United Arab Emirates has been another Asian country making strides in tokenization. The city’s regulatory authorities have introduced progressive frameworks that encourage the issuance and trading of tokenized securities, attracting global investors and fintech firms.
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