A Tale of Two Crypto Cities: Tokyo and Kyoto

 

Tokyo and Kyoto are two of Japan's most representative cities.

Tokyo serves as Japan's capital and is the center of politics, economy, education, and culture in the country. It is also an important hub for international exchange and innovation. Many Web3 companies and active venture capital firms in Japan are based in this bustling metropolis.

Kyoto boasts a long history and rich cultural heritage. With its ancient charm, exquisite craftsmanship, and tranquility, despite its reserved and restrained aesthetics, Kyoto has become lively once again due to the influence of the crypto industry.

In an era where technological advancements are shaping the future of economies worldwide, Japan is taking a strategic leap towards the Web3 revolution. Recognizing the transformative potential of blockchain technology, cryptocurrencies, and decentralized internet, Japan is wholeheartedly putting Tokyo and Kyoto at the forefront of this digital revolution.

 

Tokyo vs. Kyoto, a Tale of Two Crypto Cities

In late June this year, Japan's largest international cryptocurrency summit, IVS Crypto 2023, was held in Kyoto. Numerous well-known investment institutions set up booths at the event to connect with innovative Web3 startups from around the world. This event has reinvigorated Kyoto, the ancient city, with the influence of the crypto industry.

During the three-day conference, several Japan-themed side events took place. Among them, the Web3 Shining Golden Pavilion sponsored by Beosin was held at Kinkaku-ji (Golden Pavilion) on June 28, successfully attracting numerous local Japanese teams to participate. The cocktail party "Web3 GEISHA ROOFTOP PARTY" held by Beosin in Kyoto that evening provided an essential platform for international blockchain projects and investors to interact. This night saw a perfect fusion of Kyoto's tradition and innovation.

 

After the successful IVS Crypto in Kyoto, Tokyo is also gearing up to host the grand-scale international blockchain summit, WebX Conference, on July 25-26. This conference aims to bridge the gap between Web2 and Web3, Japanese and English, and Japan and other regions of the world. Top Web3 entrepreneurs, investors, and developers from across the globe will gather to discuss the integration of decentralized technologies like blockchain into society.

 

It's worth mentioning that Beosin has strategically partnered with Cryptogram Venture (CGV), the organizer of the 2nd Tokyo Web3 Summer Hackathon, to provide free Beosin VaaS (Verification-as-a-Service) smart contract formal verification platform authorization and 30-minute on-site and remote guidance for all projects in Tokyo Web3 Summer Hackathon. This collaboration aims to offer security support for blockchain projects and developers globally, promoting the development and application of blockchain technology.

 

Web3 Crypto Institutions take root in Tokyo and Kyoto

It can be observed that cities like Tokyo and Kyoto in Japan are increasingly embracing Web3 technology.

For instance, Sony Network Communications, a subsidiary of Sony Group, recently collaborated with Astar Network to launch a Web3 incubation program, dedicated to incubating projects related to NFTs and decentralized autonomous organizations (DAOs) to explore how blockchain technology can address various industry challenges.

Similarly, leading automotive enterprise Toyota is also delving into the use cases of blockchain technology. In early April, the company hosted a comprehensive Web3 hackathon on Astar Network to help Toyota devise more efficient team management strategies and optimize its decision-making processes. Sota Watanabe, the founder of Astar Network, commented on these developments, stating that "Many Japanese companies, especially large corporations like Toyota and Sony, are eager to work on Web3. I think the reason is simple: we completely missed the Web2 revolution, so Web3 presents a significant opportunity for the Japanese economy."

In Tokyo and Kyoto, several Web3 crypto institutions are experiencing growth. Here are some of the representative ones:

 

Web3 Enterprises/Organizations in Tokyo

1. HashPort

Founded in 2018 with a vision for asset digitization, HashPort Group has accumulated a wealth of achievements in blockchain technology. HashPort currently operates three main businesses: HashPort, providing blockchain technology consulting and solutions; HashPalette, providing NFT-related technical support; and HashBank, offering financial infrastructure services. In April 2023, HashPort completed a C-round financing of over 8.9 million USD.

2. KEKKAI

KEKKAI is a startup dedicated to enhancing the security of cryptocurrency asset transactions. Although officially established in early 2023, its wallet security plugin was already launched in December 2022. In February 2023, KEKKAI secured a pre-seed round financing of 50 million JPY, with Skyland Ventures as the investor. This financing will be used for product feature improvement and the expansion of security operations.

3. Skyland Ventures

Skyland Ventures is a relatively active crypto fund based in Japan. In the blockchain security field, it invested in KEKKAI and GoPlus, while in the cross-chain arena, it invested in Orbiter Finance. Additionally, it invested in Ethereum Layer2 Taiko, NFT data analysis platform NFTGO, and anti-MEV solution provider Wallchain in the infrastructure domain. In April 2023, Skyland announced the successful fundraising of 5 billion JPY for its fourth fund and established a seed fund dedicated to Web3 investments.

4. MZ Web3 Fund

Founded by Yusaku Maezawa, renowned as Japanese Elon Musk, MZ Web3 Fund is focused on Web3 project investments and is the most active crypto fund in Japan. In the Web3 field, MZ Web3 Fund has invested in 24 startups, including decentralized storage project SINSO, payment tools Slash and Transak, development community WEB3DEV, game public chain Oasys, and Web3 user growth platform Aki Network. MZ Web3 Fund will provide community resources through MZ Club and MZ DAO to help these projects rapidly expand in the Japanese market.

 

Web3 Enterprises/Organizations in Kyoto

1. QURAS

QURAS, founded in 2017, has a branch in Kyoto, and is dedicated to providing privacy protection blockchain solutions for enterprise. Its application scenarios include digital asset trading, supply chain management, healthcare, and financial services. In 2018, QURAS launched the mobile wallet Quras Wallet and established partnerships with several exchanges such as Uniswap, bithumb, and Mooniswap. In 2019, QURAS completed a Series A funding of $16 million, with participation from Roark Fund and SEB Venture Capital.

2. SORAMITSU

Founded in 2016, SORAMITSU focuses on research and development of blockchain technology, aiming to provide high-quality blockchain solutions for enterprises, governments, universities, and communities. SORAMITSU has many well-recognized projects in the cryptocurrency field, including Bakong and Hyperledger Iroha. In 2016, SORAMITSU developed the project Hyperledger Iroha and contributed it to the Linux Foundation's Hyperledger project, providing assistance to enterprises and financial institutions in managing digital assets.

3. NEO KYOTO NFT ARTs

NEO KYOTO NFT ARTs is a Web3 education project jointly organized by Huami Holdings Corporation and SMBC Nikko Securities Inc. This initiative allows Kyoto students creating NFT art depicting the future of Kyoto's space and content, which will be showcased and sold globally as NFTs. A portion of the sales revenue will be donated to Kyoto City for educational purpose. This project aims to establish a creative ecosystem that integrates NFT art with urban development.

4. Bar Krypto

Bar Krypto is a cryptocurrency bar in Kyoto that provides a place for digital nomads to passionately discuss Web3. Currently, Bar Krypto operates on a membership basis, and customers can become members by purchasing their membership NFT on OpenSea. Members can name cocktails and participate in DIY renovations and event planning in the bar's basement.

 

Japan's Unavoidable Encounters with Crypto Hackers

Japan was once a pioneer in cryptocurrency field but soon suffered from hacks.

In 2014, the Japanese exchange Mt. Gox fell victim to an attack. Then, in early 2018, hackers struck again, stealing over 500 million USD from the Japanese exchange Coincheck, severely hindering the development of Japan's crypto industry.

These two hacking incidents served as a significant reminder to regulatory authorities. In response, Japan required that customer assets be separated from exchange assets and that most exchange assets be kept in cold wallets.

As a result, when FTX collapsed this year, Japan's regulatory approach demonstrated its advantages.

Ryosuke Ushida, the Chief FinTech Officer of the Financial Services Agency (FSA), which regulates cryptocurrency in Japan, stated: "FTX Japan's customer assets are likely to be returned without being impacted by the Chapter 11 bankruptcy filing in the United States." This shows that Japan's crypto asset regulation policies played a crucial role in protecting local Web3 users' assets.

Currently, Beosin is collaborating closely with Japanese Web3 enterprises like KEKKAI and Terminal3. Beosin provides pre-launch security audits, runtime security risk monitoring, warning and blocking, virtual currency theft asset recovery, secure compliance KYT/AML, and other "all-in-one" blockchain security products and services to help local Web3 institutions defend against hacker attacks.

 

Japan at the Forefront of Crypto Asset Regulation

In 2016, Japan revised the Payment Services Act and the Financial Services Act and formally established a legal status for cryptocurrencies. Cryptocurrencies are treated as "crypto assets" under the Payment Services Act. Operators engaged in the purchase, sale, or intermediation of crypto asset-related businesses (and similar activities) or managing crypto assets on behalf of others must register as cryptocurrency asset exchange service providers.

On the other hand, Japan's financial regulatory authority, the Financial Services Agency (FSA), regulates cryptocurrency exchanges and investment interests in blockchain-transferable limited partnership enterprises as valuable securities (i.e., ordinary partnership securities transferred by non-electronic means) under the Financial Instruments and Exchange Act (FIEA). According to the FIEA, businesses that provide or mediate the provision of crypto asset-related derivative tools fall under Class 1 financial instruments businesses, which may constitute investment advisory or investment management businesses, requiring registration under the FIEA.

Regarding stablecoins, the Japanese government considers their classification as crypto assets or a means of payment in remittances depending on whether such stablecoins can be exchanged for fiat currency. Furthermore, as NFTs are currently not regarded as having payment functions, there are no specific regulations for them under the existing regulatory framework. However, the Financial Services Agency has put establishing a regulatory framework for NFTs on its agenda.

Despite this, Japan is continuously experimenting and adjusting its regulation of crypto assets. With the development of the crypto field, related policies are expected to evolve gradually.

Since 2019, blockchain security company Beosin has established a strategic partnership with Japanese blockchain enterprise HashPort. Both parties mainly collaborate on security audits and compliance assessments of chain platforms and smart contracts. The compliance assessment report issued by Beosin has become one of the essential reference materials for project compliance evaluations by Japanese regulatory authorities. During this period, Beosin has continuously provided professional and comprehensive security technical support, enhancing the security and compliance of Japanese blockchain enterprises.

Beosin aims to help Japanese virtual asset service providers establish secure and compliant services, meet the requirements of Japanese regulations, reduce customers' compliance costs, and assist them in creating comprehensive products and services, providing security guarantees for their business growth. Simultaneously, in Japan, Beosin offers a powerful portfolio of services and products (such as KYT products) that can help users reduce compliance risks, enhance their ability to identify risky transactions, and strengthen their ability to trace and analyze suspicious addresses, facilitating the creation of secure risk control systems in line with local compliance policies.

In April 2023, the Web 3.0 project team of Japan's ruling party released a whitepaper proposing measures to promote the development of Japan's crypto industry. In June 2023, Japan's "Money Settlement Act Amendment Bill" was voted in the Upper House, making Japan the world's first country to enact stablecoin legislation.

Akihisa Shiozaki, the Secretary-General of the project team, pointed out in a recent interview: "The cryptocurrency industry has been driven by early adopters, but now it will shift to large-scale adoption." He noted that major Japanese companies have started entering the market, with NTT Docomo, a mobile operator, recently committing to invest up to 600 billion JPY (40 billion USD) in Web3 infrastructure. Moreover, major financial institutions are also seeking to issue stablecoins to achieve national economic digitalization.

 

It is evident that Japan's embrace of cryptocurrencies and Web3 is a strategic move aimed at injecting new vitality into its economy. To leverage the emergence of Web3 for driving new economic growth, Japan must overcome many obstacles. Whether in crypto-friendly cities like Tokyo or Kyoto, the birth of truly groundbreaking Web3 companies that can demonstrate the potential of blockchain technology and serve as role models for other Japanese entrepreneurs is essential. On the other hand, we can also see that the country's Web3 policies, corporate collaborations, and regulatory progress are gradually paving the way for the development of Web3 in Japan.

Beosin is a leading global blockchain security company co-founded by several professors from world-renowned universities and there are 40+ PhDs in the team. It has offices in Singapore, South Korea, Japan and other 10+ countries. With the mission of “Securing Blockchain Ecosystem”, Beosin provides “All-in-one” blockchain security solution covering Smart Contract Audit, Risk Monitoring & Alert, KYT/AML, and Crypto Tracing. Beosin has already provided security for 2000+ blockchain companies, audited more than 3000 smart contracts and protected our customers’ assets worth of $500 billion.