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Japanese NFT Industry 2022: Welcoming a Massive Rise in Popularity

Japanese NFT Industry—Non-fungible tokens (NFTs) have been causing havoc in the art and investing industries for about a year now. They’ve made headlines for their groundbreaking utility and profitability for investors and artists alike. In 2022, there is no sign of this industry slowing down after a record year in 2021. NFTs created more than 23 billion USD in trading volume in 2021, a significant increase from the 100 million USD volume recorded in 2020, according to DappRadar statistics.

More and more Japanese businesses and industries are considering opening up to the idea of supplying NFTs in various formats, following the lead of countries in Asia. When Blockchain Art Exchange and GrowYourBase sponsored Japan’s first physical NFT art show from June to July 2021, the art community jumped on the bandwagon. Tokyo became one of Asia’s top NFT hotspots due to this groundbreaking initiative, which encouraged other artists and even a variety of businesses to look into NFTs as a viable medium.

NFTs are becoming more popular in other Japanese communities, despite the absence of any significant news stories concentrating on the country’s thriving animation industry. In Japan, for example, sports clubs are cashing in on the NFT craze as the pandemic has taken a toll on their usual revenue streams, such as stadium ticket sales.

An NFT business called Exciting Moments, backed by six professional baseball teams in Japan, began selling NFT films of baseball highlights for between 2,000 and 25,000 JPY apiece, or around $18 to $216, last December. Players who appear in these highlight reels are receiving a portion of sales. Those who are interested in trading these NFTs will be able to do so starting in the first half of 2022, thanks to a partnership between Pacific League Marketing and e-commerce business Mercari, which will employ Dapper Labs’ Flow blockchain, the same one that powers the hugely successful NBA Top Shot NFTs.

Japanese video game developers are also testing NFTs outside of sports. One of Konami’s 2022 goals is to “explore breakthroughs” in blockchain technology, and the company recently released a Castlevania-themed NFT collection in honor of the series’ 35th anniversary to that end. Square Enix, for example, recently announced interfaces into the metaverse for 2022 as part of their various initiatives. While the revelation was made in the company’s 2022 New Year address, Square Enix Holdings has already been experimenting with NFT stickers for its Million Arthur franchise, which soon sold out, proving the concept to be a success for Square Enix Holdings.

Gamers like Yoshinori Kitase of Final Fantasy, Nier creator Yosuke Saito of Nier, and Noriyoshi Fujimoto of Dragon Quest see the promise of NFTs in the gaming business. However, Sega has yielded in its plans for the future.” NFT, blockchain, and play-to-earn games are all off the table, according to Sega CEO Haruki Satomi at a recent management meeting. NFTs were revealed in Sega’s second-quarter financial statements in November 2021. However, this was met with a backlash from customers, who expressed their displeasure.

A Japanese start-up is looking into the possibility of selling music-related NFTS in the area.

Musicians and music lovers now can trade NFTs on the new mura marketplace. Studio Entre’s Norikazu Yamaguchi came up with the idea for the project, which intends to create a community of “commons-owners,” based on the premise that a customer who owns a piece of music is a representative of the music industry. Clammbon, Tetsuya Komuro, and Nirgilis are some of the renowned indie artists and bedroom producers on its roster.

Japanese NFT Industry: NFT as a Crypto Asset

To answer this topic, one must consider whether NFTs, digital objects created on a blockchain and exchangeable for other Type I CAs like Ether, fall under the PSA.

Because they serve an economic purpose, such as a payment method, they are defined in Article 2, Paragraph 5, Item 1 of the PSA, which states that Type I CAs must “pay an undefined individual the price of any products. Acquired or borrowed or any services rendered.”

Type I CA definition excludes NFTs that serve no economic use other than as a means of representing a player’s success in a Blockchain Game (e.g., characters, in-game objects, or trading cards).

The concept of a Type II CA, on the other hand, would include NFTs that do not act as a form of payment but can be exchanged for Bitcoin, Ether, or other Type I CAs between unidentified parties.

PSA works to “ensure the appropriate execution of services linked to payment settlement, user protection” and “contribute to the improvement of safety, efficiency and convenience of payment settlement systems” (Article 1 of the PSA).

In addition, the JFSA’s Crypto Asset Guidelines I-1-1(iii) state that “if the CA has the same economic purpose as the relevant CAs, in addition to being a product, right, etc. that can be purchased or sold using Type I CAs” is a criterion in assessing whether an asset is a Type II CA.

Even though trading cards and in-game items recorded on a blockchain can be exchanged for the Type I virtual currency (i.e., Type I CA under the current PSA), they would not be deemed Type II virtual currencies (i.e., Type II CA under the recent PSA) because they do not serve the same economic functions as Type I virtual currency, such as the function of a means of exchange. This was stated in response to public comments published on September 3, 2019.

For example, Type II CAs would not include trading cards and in-game products that can be exchanged for Type I CAs, if they don’t have economic purposes like payment like Type I CAs.

There are several examples where non-financial aspects of NFTs (such as trading cards or in-game items) are limited and do not fall under the definition of “Type II CAs.”

It is up to the content owner to determine whether or not a certain NFT fulfills economic services like Type I CAs and fits under the definition of Type II CAs.

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