Sony Group Corp, the entertainment giant, has joined the growing ranks of Japanese businesses exploring blockchain technology, adding a new dimension to the nation's burgeoning crypto sector that is challenging the government to reconsider its regulatory stance.
Last month, Sony officially launched its digital ledger platform, Soneium, with the expectation that developers will leverage it to create applications enhancing its gaming, music, and movie offerings. While the specifics are still being developed, the general idea is to use Soneium to create new opportunities by intersecting with Sony's diverse entertainment portfolio.
Other major Japanese firms are also diving into blockchain, including Nippon Telegraph & Telephone Corp, Toyota Motor Corp, and Mitsubishi UFJ Financial Group Inc. The latter, Japan's largest bank, is exploring the issuance of stablecoins, a type of digital token designed to maintain a constant value.
Regulatory Challenges and Opportunities
The key question for the Japanese government is whether to respond to industry calls for less stringent rules to reduce costs and encourage growth. Under Prime Minister Fumio Kishida, regulators have eased some restrictions, making it easier to list digital tokens on crypto exchanges. However, Kishida's tenure is ending, and it is uncertain whether his successors will continue to support the web3 vision — a concept of the internet built around blockchains — or further relax regulations. One significant concern for industry players is the tax disparity: while gains from traditional investments are taxed at about 20%, crypto profits can be taxed as high as 55%.
"It will always take time for regulators to get comfortable with new business models, and success will require a long-term investment of time and resources," said Angela Ang, senior policy adviser at blockchain intelligence firm TRM Labs. Despite this, she noted a growing "innovation-forward tone" from Japanese officials, which has encouraged companies like Sony to experiment with digital ledgers.
Tight Regulations and Their Impact
Japan implemented stablecoin regulations in 2023 and maintains a strict regulatory framework for crypto exchanges, focusing on investor protection. These measures are informed by past experiences with local and foreign crypto collapses, such as the 2014 hack and subsequent bankruptcy of Tokyo-based Mt Gox, once the largest Bitcoin trading platform. More recently, in 2024, Japanese platform DMM Bitcoin suffered a US$320 million (RM1.37 billion) breach.
Despite these challenges, some firms are pushing ahead. Last year, Singapore-based crypto lender Amber Group sold its digital-asset trading platform in Japan to a Sony subsidiary, citing Japan as a "high-quality market with strict regulations."
Trading activity at Japanese digital-asset exchanges is on the rebound, driven by a surge in Bitcoin and other tokens. Average monthly volumes at centralized Japanese exchanges have risen to nearly US$10 billion, up from US$6.2 billion in 2023, according to CCData.
However, licensing rules remain a hurdle. "Friction always came up when we were trying to start a new business," said Yuya Hasegawa, a market analyst at Bitbank Inc., referring to efforts to launch a custody operation.
Blockchain Possibilities for Sony
For Sony, blockchain projects offer clues about the future of Soneium. Startups are exploring new ways to trade in-game assets, such as sprites, and to copyright and monetize artistic creations. The potential of digital-ledger applications is still evolving, and their long-term viability remains uncertain.
“We believe that entertainment-related businesses operating on a web3 platform will continue to expand in the future,” said Jun Watanabe, chairman of Sony Block Solutions Labs, the unit behind Soneium.
Japan's stringent regulatory environment has its advantages, as demonstrated during the global collapse of FTX, once a major digital-asset exchange. The Japanese subsidiary of the bankrupt firm was the first to resume customer withdrawals in early 2023.
"Japan is crypto-friendly," said Fernando Luis Vázquez Cao, CEO of SBI Digital Asset Holdings, which is part of the country's top online brokerage group. "But it’s not crypto easy."
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