The main sectors of crypto in Japan are NFTs and gaming focused projects, which are largely focused on community building, localization, and longevity. Coupled with the easing of regulations in Japan, there might be an increase in interest in the crypto industry in Japan.
Key Takeaways:
- Japan has strict regulations in place to maintain stability and security for investors, which can be a challenge for smaller crypto projects.
- STEPN is a project that has successfully entered the Japan market, where timing, localized marketing efforts, and community building enabled the game to resonate with the Japanese market.
Japan is a unique market with huge potential in finance and investment, with a span retail foreign exchange industry and a thriving stock trading sector.
Initially, the Japanese government was very cautious about the crypto industry due to its early vulnerability to hacking. As a result, they decided to regulate it carefully. Even today, Japan has a limited selection of tokens due to the oversight of the Financial Services Agency.
Even then, Japan approved bitcoin as a legal form of payment in 2017, setting the stage for its meteoric rise in the crypto industry. While the government was initially skeptical of the industry, recent events indicate that the government has become more supportive as Japan’s blockchain industry continues to grow.
In April 2023, the ruling Liberal Democratic Party’s Web3 project team released a white paper recommending measures to boost the crypto industry, shedding light on the government’s increased commitment to the sector. It is also noteworthy that Japan passed the “Revised Payment Service Act” on stablecoins in June 2023, ahead of other Western countries.
On the other hand, due to restrictions such as the inability to directly invest in tokens and the inability to launch projects issuing tokens within Japan, efforts toward DeFi within the country are limited. Hence, NFTs and gaming focused projects are predominantly recognized as the main players of the crypto market in Japan.
If you’re interested in learning more about the Japanese crypto market, you can access the full report here: Crypto in Japan: Main Sectors, Industry Trends, and Future Prospects.
Features of Successful Web3 Projects in Japan
Successful projects in the Japanese crypto industry must meet certain key criteria. These include community building, localization, and longevity.
An Active Community
The ability to create a loyal community of supporters and users is one of the most important characteristics of a successful crypto project. Communities can help raise awareness, increase adoption, and ensure project sustainability. This can be achieved through a variety of methods, including community activities, incentives, and improved project transparency.
Localization
Localization is also essential for success in Japan’s cryptocurrency business. With a span cultural foundation and Japanese as the national and primary language in Japan, projects need to adapt their products and services to local requirements and regulations, translate information into Japanese, collaborate with local influencers and media, and hold local events. By engaging with localized audiences, projects can gain more visibility and users in key locations.
Longevity
Finally, effective crypto initiatives must be resilient and adaptable. This means developing a viable product and concept that will remain relevant through market turbulence. In Japan, where people are conservative and hesitant to adopt new technologies, projects must build reputation and operate for the long term to gain market momentum.
In addition to these characteristics, forming strategic alliances with key industry participants, such as other cryptocurrency initiatives, merchants, institutional investors, and the media, can help expand reach, build credibility, and drive mutually beneficial growth. This is especially important in Japan, where giants and conventional companies continue to dominate. To succeed, startups should leverage their strengths and align with these existing giants.
STEPN: A Successful Case of An International Project Entering the Japanese Market
STEPN, the first mobile game implementing Move to Earn in-game economics, emerged as a major success story in the Japanese crypto market.
A few key factors can be identified that explain why STEPN found significant success in Japan. The core game mechanics involve acquiring sneaker NFTs, which can subsequently be used within the app to earn tokens exchangeable for cryptocurrency. As players level up these sneakers using their earnings, they can accumulate larger rewards.
Firstly, timing played a crucial role. STEPN launched around the end of 2021, at a time when the macro market conditions were relatively favorable compared to the present. Following the market peak in November 2021, many individuals found themselves with surplus funds. This liquidity boost triggered a significant influx of users and in-game item purchases. While market timing might not be within a project’s control, it remains an important determinant of a project’s success.
Additionally, it is worth noting that Japanese players typically have a larger spending power than those in other countries. As previously highlighted, Japanese players are often willing to spend significant amounts on in-game items, with some investing five to six-figure sums to maximize their in-game profits.
Such expenditure levels would be less likely outside of Japan. As an example, the primary growth driver of Axie Infinity, a popular Play-to-Earn game in the Philippines, \was the Scholar system (where NFT holders can lend their NFTs to share revenue, negating the need for players to own NFTs), which enabled individuals with less upfront capital to participate.
STEPN initially targeted Japan for its marketing efforts. Therefore, before players in other parts of the world could join the game’s economy, Japanese players had already shaped the in-game market according to their purchasing power, as opposed to a globally averaged one. As the Japanese are generally less familiar with globally-based communities, the successful creation of a local Japanese community sparked a positive cycle, leading to increasingly more discussions about STEPN in Japan than anywhere else.
Source: Google Trends
Though specific to STEPN, the use of GPS can also be considered a contributing factor. STEPN demanded accurate GPS tracking to prevent cheating and maintain the in-game economy’s integrity, incorporating real-time stakes. With many Japanese using iPhones, which come with accurate GPS systems, it made it easy for players to start playing (and earning).
The Gacha system is a distinct feature that other projects could potentially adopt, where players spend in-game currency to receive a random in-game item. Owing to the long history of Web2 mobile games, the Gacha system has been a significant growth driver. STEPN successfully integrated this concept into their game, which fostered a sense of familiarity among players.
At its peak, STEPN players were able to earn roughly $3,000 per day simply by walking. The game’s intuitive nature, coupled with its lucrative rewards, sparked viral interest, extending even beyond the crypto community.
While future projects can learn from the strategies employed by successful predecessors like STEPN, it’s important to note that macro market conditions and other external factors also play a substantial role in a project’s success in penetrating the Japanese market.
Exploring the Challenges and Opportunities of the Japanese Crypto Industry
Japan has a span and robust financial system, which provides a solid framework for the development of blockchain and web3 in the country.
When discussing the Japanese crypto market, regulations are often a primary concern. Japan has strict regulations in place to maintain stability and security for investors, as well as to ensure market integrity. While regulations protect the industry, they can also pose challenges for smaller crypto projects, hindering their entry and growth due to compliance burdens and high tax burdens on cryptocurrency-related income. In addition, lengthy approval processes for token listings can contribute to a perceived lack of market activity.
Japan has a long history of valuing stability and caution in financial matters, which can limit innovation and market agility while protecting traders from excessive risk. Innovation is key to the success of cryptocurrencies, so the lack of it can cause crypto businesses to fall behind competitors from other countries.
The good news is that recently, in April 2023, the Liberal Democratic Party, Japan’s largest political party, released the “Japan 2023 Web3 Whitepaper.” This whitepaper eased regulations and encouraged development in various aspects of the industry by reducing tax burdens and improving listing efficiency. Another recent development in June 2023 is that crypto issuers in Japan will not have to pay capital gains taxes on unrealized gains.
Institutional investors in Japan are showing a growing interest in cryptocurrencies and are increasingly recognizing the potential of it. Their growing interest and participation in the market has the potential to significantly boost the entire crypto industry. It also brings greater liquidity, stability and credibility to the market, attracting further interest from both retail and institutional investors.
The Japanese market has demonstrated its span buying power, from traditional games and classic IPs to crypto games and NFT. Japan’s combination of cultural expertise and span financial system positions it as a potential global leader in the web3 industry. By building on its strengths and fostering innovation and growth, Japan has the opportunity to lead the future of web3 in the world.
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