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On October 8, 2024, the Japan Finance Department issued an important statement.It is clarified that “unmanaged wallet services” using authentication technology are not considered as crypto asset exchange industry.The impact of this policy is far more than the interpretation of legal provisions, but rather marks an important step for the Japanese government in promoting digital innovation and global competition.So, what exactly does this statement mean?What is its impact on the Japanese Web3 and blockchain industry?Aiying believes that it will lead you to interpret the connotation of this policy and explore its possible impact on the industry’s future.
The meaning behind the statement of the Department of Finance: Legal clarification and innovation encouragement
Unmanaged wallet, as the name suggests, is a digital wallet where users manage their own private keys without relying on centralized third parties.Representatives of this type of wallet include the well-known “MetaMask” and “Phantom”, They provide users with the ability to independently control digital assets and become a key component of the decentralized finance (DeFi) ecosystem.However, since its operations do not rely on centralized exchanges,Previously, there has been controversy over whether an uncustodial wallet is a crypto asset transaction.The Japan Financial Agency reached this conclusion through the “Gray Zone Disinfection System”, clarifying that services without custodial wallets do not belong to crypto asset trading business.This system aims to eliminate uncertainty by finding clarity between emerging businesses and existing regulations, thereby reducing compliance barriers and encouraging more innovative companies to move in.The confirmation process was promoted by the general community legal person “Japan Contents Blockchain Initiative” and its Pass Wallet project.Pass Wallet is not a direct unmanaged wallet, but a service provider that provides unmanaged wallet certified infrastructure. The release of this statement provides strong support for the service legitimacy and business expansion of its and the entire industry.
Reduce compliance burden and open up a new situation for unmanaged wallets
The most direct impact of this statement is the lowering of the compliance threshold for custodial wallet providers.Previously, Japan’s supervision of crypto assets was quite strict, and companies faced a lot of legal requirements to apply for crypto asset trading licenses. However, due to its essential characteristics, it is difficult to fully comply with the norms of the traditional crypto asset exchange industry.This vague zone has discouraged many unmanaged wallet providers when entering the Japanese market.
The Financial Office’s statement clarifies the legal status of a custodial wallet, meaning that the barriers to compliance for such products are greatly reduced.This is undoubtedly an important “loosening” for international leading wallets like MetaMask and emerging local decentralized wallet developers.They can devote more energy and resources to technological innovation and market expansion rather than complex legal reviews and compliance operations.This also means that more local Japanese developers will have the opportunity to participate in the development of unmanaged wallet services, promoting the enrichment and diversity of the entire ecosystem.
Beneficiaries of the Japanese Web3 Eco: Spring of Certified Infrastructure and DApps
Pass Wallet, as a certified infrastructure provider without a hosted wallet, is one of the important beneficiaries of the statement.Pass Wallet provides authentication-related technical support for unmanaged wallets to improve the security of user authentication.This type of infrastructure is key to achieving wallet security and user trust.As compliance uncertainty decreases, infrastructure providers such as Pass Wallet will be more confident to expand services, especially as users’ demand for secure authentication grows.
The clarity of the legal status of no custodial wallets will also directly promote the further popularization of decentralized applications (DApps) in Japan.Unmanaged wallets are the entrance for users to enter the DeFi world, and the legalization of wallets will undoubtedly attract more users to participate.Take the decentralized exchange Uniswap and lending protocol Aave as an example, which seamlessly integrate with custodial wallets through which users can trade and borrow directly.After this statement, such DApps are expected to gain more Japanese users, as users no longer need to worry about the legal risks of their operations.
Increased regulatory transparency: Increased investor confidence and global competitiveness
For the Japanese market, this open attitude will undoubtedly attract more international capital to enter the Japanese market.For example, some internationally renowned venture capital firms, such as a16z Crypto, may develop a stronger interest in Japanese Web3 startups, especially in areas that support infrastructure such as wallets and certification services.The clarity of policies allows these investors to invest more market and allocate resources more with greater peace of mind, thereby further promoting the development of the industry.
Aiying believes that from the perspective of international competition, Japan has sent a strong signal for support for Web3 innovation through this statement.In contrast, the United States and the European Union remain cautious in regulation of unmanaged wallets, focusing more on anti-money laundering (AML) and customer due diligence (KYC).Japan has recognized the compliance status of unmanaged wallets, providing a more friendly and clear business environment for global Web3 companies, which may lead the global trend of unmanaged wallets and their related services.
