[NEWS] LDP web3PT releases "Web 3.0 White Paper 2024" mentions introduction of separate reporting taxation, etc

On the 12th, the Liberal Democratic Party's Digital Society Promotion Headquarters web3PT (Project Team) announced that it had compiled the "Web 3.0 White Paper 2024 - Towards an era in which new technologies become the social infrastructure" and had been approved by the Digital Society Promotion Headquarters. After this, it will be reviewed by the Policy Research Council and become the LDP's official policy.

The 2024 edition of the white paper announced this time is composed of three pillars: 1 "Nippon Nexus: Weaving the web3 Era - Japan becomes the center of the web3 era", 2 "Issues that need to be addressed immediately to promote web3", and 3 "Issues that should be discussed and deepened in anticipation of further development of web3".

The report includes many of the industry's requests, such as improvements to the cryptocurrency tax system.

First, in "Nippon Nexus: Weaving the web3 Era - Japan Becomes the Center of the web3 Era," the report lists measures to improve the business environment, such as making company-owned cryptocurrencies exempt from the end-of-period mark-to-market tax, revising the Payment Services Act to enable the circulation of permissionless stable coins, and revising the Cabinet Order to promote the use of DAOs.

In terms of improving the investment environment, the report lists the cabinet's decision to make cryptocurrencies held by third parties long-term exempt from the end-of-period mark-to-market tax, and to amend the LSP Act to enable investment limited partnerships (LPS) to acquire and hold cryptocurrencies.

In the following section, "Issues that Need to Be Addressed Immediately to Promote web3," 13 topics were raised as issues to be considered, the issues clarified, and recommendations were made on how to address them.

Regarding the issue of the need to utilize promising technologies that contribute to the digitalization of society, such as VC (Verifiable Credentials), DID (Decentralized ID), and DIW (Digital Identity Wallet), the report states that the government and local governments should take the lead in "organizing the systemic and technical issues with a view to becoming the issuer and verifier of VCs, with the Digital Agency playing a central role in promoting this."

In addition, in relation to the diversification of investment vehicles and schemes for blockchain-related businesses, the report states that although a proposal to amend the LPS Act has been submitted regarding the acquisition and holding of crypto assets by LPS-type funds, it is an issue that it is not clear whether crypto asset issuers such as startups are considered to be crypto asset exchange businesses when they sell crypto assets to LPS.

Therefore, the report states that the formulation of subordinate legislation is necessary in the revision of the LPS Act, and that the authorities need to take immediate action to determine whether issuers are crypto asset exchange businesses.

Regarding tax reform, which is attracting attention, the report proposed that profits from cryptocurrency trading be subject to separate self-assessment taxation and that a carryover deduction for three years from the following year be introduced from the income amount of losses, while profits from cryptocurrency trading are currently classified as miscellaneous income and taxed at a maximum of 55%.

Furthermore, it was stated that profits from cryptocurrency trading should not be taxed at the time of exchanging cryptocurrencies for another cryptocurrency, but rather when the cryptocurrency held is exchanged for legal tender.

In addition, in order to promote the use of DAOs, it was proposed that practical issues should be identified and interpretations clarified, and that points that can be addressed by reviewing practical operations should be dealt with promptly. It also stated that measures to promote the distribution of security tokens and security tokens of publicly offered specified beneficiary certificate issuing trusts should be included in the scope of NISA.

Regarding the revitalization of NFTs, it was stated that the public and private sectors should work together to consider the formulation of guidelines that show legitimate business models for random sales using NFTs and fantasy sports services. Regarding the return of profits from the secondary market to players, the report states that relevant organizations, relevant ministries, and industry organizations should work together to quickly establish rules for formulating an appropriate model.

The report also mentions raising the cryptocurrency leverage ratio and realizing a cryptocurrency spot ETF.

Regarding "issues that should be discussed and deepened in anticipation of further development of web3," the report takes up four issues, identifies problems for each, and makes recommendations. Specifically, the four points are as follows.

• Support for overseas expansion of web3 content
• Safe and secure usage environment
• Support for local governments
• Cryptocurrency business

Regarding "support for overseas expansion of web3 content," the report mentions the lack of awareness of how to use NFTs and legal risks, and states that concrete support should be provided, such as by providing consultation to interested content holders and creators and promoting business with overseas companies.

In addition, regarding cryptocurrency business, the current cryptocurrency leverage ratio is capped at 2x, but the report clearly states that the leverage should be increased because this is the reason why users are leaving for overseas cryptocurrency exchanges, etc.

Furthermore, in order to realize a cryptocurrency spot ETF in Japan, it is recommended that consideration should be given to the purpose of the Investment Trust Law. If necessary, it is recommended that legal amendments etc. should be made, and that Japan should take steps to realize a Bitcoin spot ETF.

Reference:White paper,summary
Image: Shutterstock

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