Japan’s Approval Culture Is Hindering Crypto Industry Growth, Says WeFi CEO
Tokyo, July 26, 2025 — Japan’s notoriously slow and risk-averse regulatory approval culture is emerging as the main obstacle to cryptocurrency adoption and innovation in the country, according to Maksym Sakharov, co-founder and CEO of decentralized onchain bank WeFi. Speaking with Cointelegraph, Sakharov emphasized that the lengthy and conservative approval process—not tax policy—is pushing blockchain startups and liquidity to relocate offshore.
Regulatory Bottlenecks Over Taxes
Japan has long been viewed as a key player in the crypto space, but recent trends show an alarming slowdown in local innovation. While the country’s current progressive crypto tax rate reaches as high as 55% and a proposed new flat tax of 20% on crypto gains is under consideration, Sakharov argues that these taxes are no longer the primary barrier.
“The 55% progressive tax is painful and very visible, but it’s not the core blocker anymore,” Sakharov explained. “The Financial Services Agency (FSA) and Japan Virtual and Crypto Assets Exchange Association’s (JVCEA) pre-approval model and the absence of a truly dynamic sandbox are what keep builders and liquidity offshore.”
The Harsh Realities of Japan’s Approval System
The regulatory approval path in Japan typically involves a two-step process. First, startups must gain self-regulatory review approval from the JVCEA. Only then can they move forward with final oversight by the Financial Services Agency. This process often drags out across 6 to 12 months or longer, severely slowing down project launch timelines.
“This prolonged timeline burns runway,” said Sakharov. “It forces many Japanese teams to list tokens and launch products overseas first.” The regulatory hurdles are further compounded by repeated delays in JVCEA token screening, initial exchange offering (IEO) white paper vetting, and ongoing notifications to the FSA, frequently requiring multiple rounds of revision. According to Sakharov, the process “is designed to avoid downside, not to accelerate innovation.”
Japan Falls Behind Other Asian Markets
When compared to other major Asian crypto hubs, Japan’s approval culture lags significantly. Sakharov compared Japan to Singapore, the United Arab Emirates (UAE), and South Korea:
- Singapore maintains strict regulations but provides clear pathways for crypto projects, allowing faster market entry.
- The UAE offers a generally faster regulatory process and has been proactively introducing frameworks conducive to tokenized securities trading.
- South Korea’s Virtual Asset Utilization Promotion Act (VAUPA) focuses on ongoing exchange obligations rather than extensive external pre-approvals, enabling quicker listings.
“Japan is slower,” Sakharov said bluntly. “A simple token listing here can take half a year or longer.” He warned that without cultural shifts in the regulatory approach, even with tax reform, innovation and liquidity will likely continue to migrate offshore.
“Culture eats tax cuts for breakfast,” he noted.
Proposed Solutions for Japan’s Crypto Landscape
To revitalize Japan’s crypto scene, Sakharov advocates for several key reforms:
- Time-boxed, risk-based approvals to streamline the regulatory timeline.
- Establishment of a functional regulatory sandbox that supports innovation areas such as staking and governance experimentation.
- Implementation of proportional disclosure requirements to reduce unnecessary bureaucratic hurdles for smaller or lower-risk projects.
“Without these changes,” Sakharov warned, “domestic crypto projects will keep scaling abroad, driven by uncertainty around approvals and long wait times, not tax burdens.” He described the frustrating scenario many builders face: “building for 12 months only to be told your token cannot be listed or your product cannot launch.”
Regional Momentum Gathers Elsewhere in Asia
The growing divergence between Japan and other Asian crypto markets is drawing attention from investors and industry insiders alike. Earlier this month, Maarten Henskens, head of protocol growth at Startale Group, highlighted Asia’s expanding leadership in tokenization, noting the region’s increasing appeal to global capital due to regulatory clarity.
For example, Hong Kong recently launched the Ensemble Sandbox, a fast-track innovation hub designed to provide agile regulatory support and foster experimentation. Meanwhile, the UAE has introduced progressive frameworks aimed at encouraging tokenized securities issuance and trading.
“Hong Kong is showing how agility can bring experimentation to life, while Japan is building long-term depth,” Henskens observed.
Looking Ahead
Japan faces a critical juncture as it aims to keep pace with rapidly evolving digital finance ecosystems worldwide. Reforming its approval culture could play a decisive role in whether the country retains its position as a global crypto innovation hub or continues to lose startups and liquidity to faster-moving jurisdictions.
As crypto and blockchain technologies gain increasing importance in the global financial landscape, Japan’s approach to balancing regulatory caution with innovation acceleration will be a closely watched barometer of its future role in the sector.
For more detailed insights and ongoing coverage of cryptocurrency regulation in Asia and beyond, stay tuned to Cointelegraph.