At the end of 2023, the Liberal Democratic Party web3PT held its first initiative, the “DAO Rulemaking Hackathon.” Furthermore, it is a major driving force behind Web3 in Japan, including promoting tax reform regarding third-party ownership of crypto assets. We asked web3PT chairman Masaaki Taira and executive director Hideto Kawasaki about web3PT’s initiatives in 2023 and the future.
──web3PTIn November of last year, the executive director was replaced by Congressman Kawasaki from his predecessor, Congressman Shiozaki, and a new system was established. Have there been any changes due to the start of the new system?
Representative Taira:I believe that the new structure of the secretariat has been a great success. Congressman Kawasaki is very knowledgeable about Web3 and is enthusiastic about it, which has given web3PT even more momentum. In particular, through the “DAO rulemaking hackathon” led by Congressman Kawasaki, a new Web3 community is being created that involves the government. I think 2023 will be a very good year.
Representative Kawasaki:Originally, I was the deputy secretary general of web3PT, but I felt a lot of pressure when I took over as secretary general from Congressman Shiozaki. He received two very big balls: tax reform for third-party ownership of crypto assets, and rulemaking for DAOs (decentralized autonomous organizations). However, on the other hand, Congressman Kanda, who was one of the deputy secretaries-general, became a Parliamentary Vice-Minister of the Cabinet Office in charge of the Financial Services Agency, and Congressman Shiozaki became a Parliamentary Vice-Minister in charge of the Ministry of Health, Labor and Welfare, making them reassuring allies on the government side. In some ways, it has become easier to proceed. The “DAO Rulemaking Hackathon” was an initiative in which we did not know whether it would be a success or not, but the enthusiasm of the participants was directly conveyed to us, and it turned out to be a great initiative.
DAOMoving forward with system design
──“DAO Rule Make Hackathon””What was the response and reaction?
Representative Taira:DAOs are diverse, so before we held the hackathon, the people actually involved in DAOs were in a state of confusion as to what they wanted from us, the rule makers. The hackathon was attended by government and ministries, as well as lawyers from the web3PT working team, and we were able to listen to the complex stories that are happening on the ground in real life, which was a great learning experience and also helped us sort out the points at issue. While overseas there is a world of Web3 that seems to be aimed at capital gains, I felt that in Japan, the down-to-earth use of Web3 and DAO management methods are growing.
Representative Kawasaki:Since we started from a place where we had no idea how to proceed with the hackathon, we had a hard time creating an overall picture. The event was originally planned to be held three times, but the number of groups that requested participation far exceeded the available quota, so the number was suddenly increased to four. I think that’s why so many people were paying attention to it.
There are a wide variety of DAOs, including some that focus on regional revitalization, and others that aim to promote content such as movies or sports. At this hackathon, we were able to hear stories from a variety of angles, including a shared awareness of the issues and a desire to create a system that would be more widely accepted. I also think it was very good that after each meeting, the businesses that participated had the effect of exchanging business cards and connecting with each other as a meet-up. It was a new discovery, with a style that had not been seen in the expert meetings held by the Liberal Democratic Party up until now.
──At the hackathon, I felt that there was a strong awareness of the issue of “What is the definition of a DAO?” How will web3PT understand the definition of DAO and proceed with system design?
Representative Taira:There is a strict idea that if a smart contract is not implemented, it is not a DAO. We may eventually aim for that, but we have no intention of limiting ourselves to a narrow, strict DAO from the start. From the loose sense of DAO to the strict DAO, the important thing is how to bring the gray areas to white.
But I’m not going to restrict it just because it’s gray, or say it’s black. However, it is difficult for local governments and large companies in particular to enter the market if it is gray, so we would like to resolve this issue as soon as possible. In addition, there are aspects of the group that are working hard in a gray area, without knowing the extent to which their core members will be held legally responsible. I think DAO can be divided into several types, but I would like to start by improving what I can.
Representative Kawasaki:I agree, and we don’t want to define DAO in a narrow sense. For example, if we define a DAO as something that uses blockchain and has a treasury wallet, that will hinder the fun of DAO. As was discussed at the hackathon, it is not necessarily necessary to use a specific tool.
──At the hackathonThere were many voices expressing hope for the granting of corporate status, but for the time being, will the plan be to use an LLC-type scheme based on a limited liability company?
Representative Kawasaki:At the hackathon, we heard someone say, “If we wait for legislation, we won’t be able to move forward with our business.” When we think about what the current scheme can do, we understand that the LLC type scheme is the most compatible. I would like to proceed with this by amending the Cabinet Order. Specifically, we are currently working with various ministries and agencies and working teams to consider whether the issue could be resolved by making minor changes to the ordinance of the Financial Instruments and Exchange Act or by revising the articles of incorporation of limited liability companies. are doing.
──There was also discussion about how to protect participants’ anonymity. Are there any concrete ideas?
Representative Kawasaki:Regarding laws and regulations related to limited liability companies, an important point is how the articles of incorporation are established. By having the company (DAO) know the names and addresses of its employees and writing them in the articles of incorporation, the company also states in the articles of incorporation that the names and addresses of the employees are restricted from being viewed by other employees.
──What do you think about the schedule leading up to the revision of the Cabinet Order?
Representative Taira:We at web3PT hope to have the issues that can be addressed by amending the Cabinet Order in time for April 1st. To this end, for example, we can envisage a process in which web3PT issues an urgent proposal, asks each government agency to take over detailed consideration, solicits public comments, and revise the ordinance. Based on this schedule, we would have to issue an emergency proposal by the end of January. However, it is expected that it will take time to develop comprehensive and comprehensive legislation regarding DAOs. Discussions will continue on the details and feasibility, such as whether it is not necessary to create a bank account or whether blockchain code can replace the articles of incorporation.
Representative Kawasaki:Although the Diet schedule is also a factor, I hope to make the emergency proposal by the end of January, or at the latest by the first week of February.
Also marked by tax reform
──The Liberal Democratic Party’s tax reform outline, which includes a review of the holding of crypto assets issued by other companies, was approved by the Cabinet at the end of December. The revision took two years to implement, following the revision of the company’s own publication last year.
Representative Taira:The tax reform for third-party ownership took considerable effort to get the party’s tax system investigation committee to understand it and pass it. I think we can take pride in this as an achievement of web3PT. Traditionally, tax reform has been a difficult process, but this time web3PT appealed to many members of Congress, saying, “If we don’t achieve this, we won’t be able to expect tax revenue, and the Web3 community and ecosystem will never be completed.”
It should be noted that in Japan, there is currently a trend in which Web3 startups and major Japanese companies such as NTT, Toyota, and Sony are collaborating to create new businesses and added value. . During the “lost 30 years,” there were times when startups and large companies clashed, but there was almost no movement to “work together.” This trend is likely to accelerate in the future. With the tax system now clearer, it has become easier for investors and large companies to proceed with business together. This year, we can expect results from Japan in the Web3 field that will surprise the world.
Furthermore, there are voices saying, “Isn’t Japan a good place to start a business?” and businesses who have moved their bases overseas saying they are “considering returning to Japan.” This is probably due to the tax reform for self-issuance and other companies’ issuances, which has created an environment in which the ecosystem operates.
Representative Kawasaki:I have heard from business owners who have moved overseas that it is easier to live in Japan, so I feel that there will be a new wave of people choosing Japan as a base for their Web3 business. . When I think about what happened a few years ago, I can only say that I am overwhelmed with emotion. In the future, web3PT will continue to pay close attention to the system to ensure that it does not become difficult to use as we finalize the details.
──There seems to be some concern about the conditions for restricting transfers in order to exempt them from period-end mark-to-market valuation taxation.
Representative Taira:In the first place, this is a revision that would not be possible using conventional thinking, and some conditions are unavoidable. This is an area related to finance, and it is not an area where you can do whatever you want. I think it is important not to make the system difficult to use, but to spread understanding and make it easier to use.
There are also voices saying that the next step is to implement separate taxation, but in order to achieve that, it will be necessary to introduce regulations similar to those for securities. This is not an easy task to tackle.
Representative Kawasaki:As politicians, we have to consider the overall impact from a broader perspective. When something is revised in the tax system, there is normally a period of follow-up to see what kind of impact it will have, and the next move will be decided after seeing the impact. In this case, the tax system reform was carried out at a speed that would have been impossible in the past, with the tax system being amended for issues issued by other companies the following year after the revision was made for issues issued by the company itself. First of all, it is necessary to determine whether the reform is fully functional.
Looking around the world, there is a reality that conflicts are occurring, and in such an international situation, significantly relaxing regulations on crypto assets could lead to money laundering and terrorist financing. To be honest, we separated the careful part and the driving part.
Representative Taira:We want to create a serious ecosystem. The collaborations between startups and large companies that I’ve heard about are not just seeing Web3 as a tool for capital gains, but rather are committed to using Web3 to create added value. We want to support that, and we have no intention of getting involved in the crypto asset money game. Together with startups and investors, and with the help of large companies that have until now been “sleeping lions”, we imagine that by turning the ecosystem around, the seeds sown will become fruit.
web3PTthe significance of
──I think the role and presence of web3PT will become even more important within the Liberal Democratic Party.
Representative Kawasaki:As the world is riding on the Web3 trend, I think it is extremely meaningful that the Liberal Democratic Party has a web3PT. For example, Tsukuba City in Ibaraki Prefecture is implementing online voting using blockchain and My Number cards, and Sendai City is also promoting initiatives using blockchain. If more and more Web3 initiatives involving local governments increase in the future, many politicians will naturally think that they need to understand Web3. In such cases, the Liberal Democratic Party has web3PT and has a system in place to follow up.
Representative Taira:The good thing about web3PT is that it collects information. He is connected to people who are active at the cutting edge and actively exchanges opinions with them. I think what makes web3PT unique among the Liberal Democratic Party is that it is connected to people who are involved in Web3 not only in Japan but also around the world.
──web3PTWhat are the initiatives for 2024?
Representative Kawasaki:The major goals are to implement tax reform for third-party ownership and to develop regulations related to DAOs. Regarding DAO, as the hackathon progressed, not only short-term issues but also medium- and long-term issues became clear. The next step is to clearly reflect this in the next white paper. Furthermore, we would like to grasp the current situation in areas other than DAO and identify new important points for policy within web3PT.
Representative Taira:I’m hoping that Shinuchi will finally appear in Web3 cases this year. As is often said, the Japanese game industry is making a full-fledged entry into Web3, efforts are being made to stimulate fan communities, and startups and large companies are starting to work together on layer 1 and layer 2 chains. Dew.
Furthermore, we hope that some local governments will succeed by issuing NFTs as return gifts for hometown tax payments. When new systems and ecosystems begin to operate, new regulatory and tax issues will likely arise. We would like to respond carefully to such matters and continue to support web3 in Japan.
｜Interview/Text: Koki Mizuno
｜Edited by: Takayuki Masuda
｜Photo: Left: Congressman Masaaki Taira, Right: Congressman Hideto Kawasaki (Photo: Airi Okonogi)