Achieve results globally. A year of battle to grow to trillions of yen or tens of trillions of yen – Startale Labs CEO Sota Watanabe[2024 Special Feature]| CoinDesk JAPAN

Mr. Sota Watanabe, who works on the Japanese blockchain “Astar Network” and is a Web3 entrepreneur active on the world stage, often appears in the media and at national events. While attracting attention for its partnerships with large companies, there was also an unexpected move this year with the announcement of plans to launch Ethereum Layer 2. At the end of the year, he went on a pilgrimage, his hobby, and thought about it while walking about 100 kilometers in four days. Mr. Watanabe, who says he is drawing a “comprehensive scheme,” is thinking and what is his goal?

A scheme that looks ahead to 2 and 3 years from now

──Looking back on 2023, what kind of year was it?

Watanabe: In 2023, we made all the preparations to win in the next cycle. I feel like I’ve done everything I can. In the year since we experienced a bear market, the number of people involved in this field has decreased, and with the rise of AI, attention has focused on AI, but this has given us more time to focus on what we need to do.

We were fortunate to not have any financial issues and expanded our staff. We established Startale Labs in January, and we believe that this will become the growth engine for Astar Network and the Web3 business in the future. It was launched in Singapore, and already has offices in Japan and the UAE, and plans to open an office in the United States in 2024.

In terms of business, the biggest one was the capital and business alliance with Sony Network Communications. I think Sony is the Japanese company with the most potential in Web3. This is because the company has a wide range of fields, including games, finance, insurance, and automobiles, and is consistent with Web3. The possibility of building a platform that will serve as the foundation for such a wide range of fields is extremely exciting.

──Please tell us more about Startail Lab becoming a growth engine.

Watanabe: We have created a comprehensive scheme so that the growth of Startail Lab, which handles Web3 business development and product development, will spread to the growth of Aster Network. It’s not just our story, so there’s not much we can announce yet, but I think people will probably realize in two or three years that that’s what happened. At that time, I want them to think, “Startail Lab, Aster wasn’t doing it haphazardly, but had been preparing it from that point on,” and “I’ve been drawing and executing the picture up to this point.”

Aster Network is currently the No. 1 project in Japan, but it is still around 100th globally. The market capitalization is at the 100 billion level. We want to compete to make this into the world’s top 10, with a market capitalization of trillions of yen or even tens of trillions of yen. It would be embarrassing if I were number 100 in the world and representing Japan.

I want to create companies and products that are like Sony and Toyota in hardware, or to put it simply, Sony and Toyota in the Reiwa era in the software world.

Negative reactions are a good thing

──There was some negative reaction when it was announced, but is Layer 2 “Astar zkEVM Powered by Polygon” created in partnership with Polygon Labs one of those schemes?

Watanabe:exactly. With the announcement of “Astar zkEVM Powered by Polygon”, Layer 2 of Ethereum, business development has become much easier. Until now, Aster Network had a unique UI/UX, which could sometimes be a disadvantage. By using the general UI/UX of Ethereum Layer 2, discussions with customers, such as those regarding new Web3 projects, are now proceeding more smoothly. I would like to add one more thing: In December, Ethereum founder Vitalik Buterin announced that some layer 2 functions would be implemented in Ethereum itself, but such moves have already been incorporated into the overall scheme.

I think it’s actually a very good thing that there was a negative reaction. As the scale of a product grows, negative opinions are bound to appear. No matter what measures the Prime Minister or the heads of large companies take, there will be pros and cons, and it is impossible for us to be the only ones praised by everyone. The scariest thing is being indifferent and not being noticed. As a project, it is starting to have a social impact, so I think it’s best if there are a lot of pros and cons, but even so, I want to place more importance on producing results than anyone else.

It became a trend on X (old Twitter) for two days in a row, and that’s how many users are paying attention to it. The compliance team is doing ego searches on X from time to time, and although there weren’t many critical comments, there were a lot of positive comments, and it spread as a topic. I found out that I was doing it.

On the other hand, I also feel a strong sense of social responsibility. I have had many opportunities to talk with the government and the Liberal Democratic Party, and just today I returned to Tokyo from the ASEAN and Japan Young Business Leaders Summit held in Karuizawa. In connection with this meeting, I also posted it on Youtube from the Prime Minister’s Office. Beyond the framework of Web3, we are increasingly being treated like representatives of Generation Z, and I strongly believe that we, as Startale Lab, must accomplish this.

—You also often make comments about the Japanese economy.

Watanabe：There is a strong sense of crisis regarding the Japanese economy. In the era when Japan was once called “Japan as number one,” there were legendary business leaders like Akio Morita, Konosuke Matsushita, and Soichiro Honda. The next generation includes Tadashi Yanai and Masayoshi Son. However, objectively speaking, I don’t think there are any Japanese companies or Japanese managers that everyone in the world knows, including us in our 20s. If things continue like this, our generation will be the last generation to know such legendary managers.

I think the Japanese economy will be in trouble unless it produces companies that have global success over the next 10 years or so and overtake the current companies like Sony and Toyota. I feel there is a huge opportunity in the Web3 field, so I want to leverage that and create products and companies that represent Japan beyond the Web3 industry.

However, if this continues, it will still be a Singaporean company. At the end of the year, it was reported that crypto assets held by third parties will be exempted from end-of-year mark-to-market taxation. Furthermore, I would like to return to Japan if the tax reform progresses and the personal tax system changes.

The sense of crisis I felt while traveling the world

──The issue of end-of-period mark-to-market valuation taxation was sometimes referred to as the “Sota Watanabe issue” because Mr. Watanabe moved to Singapore due to tax issues.

Watanabe:When we launched Aster Network, the valuation of the Aster Network’s native crypto assets that we owned was likely to be worth around 200 billion yen at the end of the fiscal year, and we were in a situation where we would have to pay 30 billion yen in taxes. It’s a mark-to-market evaluation, not cash, and the only way to pay taxes is to sell the project. That was putting the cart before the horse, so I moved to Singapore.

It is difficult to get all concerned parties to correctly understand the need for tax reform. However, although I have said many things, there are many other people who are engaged in much more difficult work. I believe that my role is to produce results and provide feedback.

──When did you develop the sense of crisis you mentioned earlier?

Watanabe：I can’t think of a specific reason, but as our global members are currently in 19 countries, and we’ve been traveling to New York last week, South Korea, Singapore, and now Japan, I’ve been thinking about “being Japanese.” There are so many moments to be thankful for.

For example, when the foreigner sitting next to you on a flight uses Sony earphones, when you go to a very remote part of Russia you still see a Toyota car, when you see a lot of advertisements for PlayStation 5 in Croatia, when you go abroad. It’s quite lonely, so it’s encouraging to see Japanese companies doing their best. I feel “cool”.

However, Toyota and Sony are already long-established companies, so I think they need to renew themselves when considering the Japanese economy as a whole. During my travels, the feeling that I needed to create a company that would lead to the next generation grew stronger.

Asia takes the lead in Web3

—It’s hard to notice when you’re in Japan. What does metabolism need?

Watanabe：Japan is very blessed from a global perspective. I think what is needed is a hungry spirit and perspective. As Aster reaches the scale of 100 billion yen, in a sense, if you are doing it for the sake of money, you may be able to say that you don’t need to do it any more. For example, if you list on Mothers, you will receive billions of yen. Some people say that’s not enough. If not, why do we still need to do it? What is important is the perspective and the mission.

If you were to live in Japan now, there wouldn’t be much reason to work hard. This is a good thing, but if we think about the next 50 or 60 years, we probably won’t be able to maintain our current lifestyle. The working population will decrease, taxes will rise further, and security may even worsen. I want to change that for the better. I believe that if we can achieve global success with a high perspective and a hungry spirit of winning on the global stage, the flow of the world may change.

──What kind of things can we proceed with in 2024?

Watanabe:First of all, the numbers are important. How big can you make something? At the hundreds of billions of yen level, we are still a startup, so if we can reach the trillions or even tens of trillions of yen level, we think our presence will grow. I think we’re in a position where we can potentially make it happen, and it couldn’t be more exciting.

Although there are many things we cannot say in detail yet, we are already making progress in our efforts with Sony. Aster is also doing a lot of things. In 2024, Bitcoin ETFs are expected to be approved in the United States, various deregulations will progress in Japan, and stable coins will also appear. It’s all about the fun elements. I think the important thing is how much we can do globally.

I also believe that Web3 is an area where Asia can take the lead. At a time when the United States is lagging behind in terms of regulations, Asia has great potential. There are many young people. In that sense as well, we would like to combine the power of Asia, enter the United States in 2024, and produce results globally through innovations originating from Japan.

Sota Watanabe
Founder of Astar Network, a public blockchain from Japan. CEO of Startale Labs. Next Web Capital, Hakuhodo key3 founder. He serves as a board member of the Japan Blockchain Association and an advisor to Marui Group, GMO Web3, Dentsu web3 Club, etc. In 2022, he was selected as one of the 30 people under 30 in Asia in the technology category by Forbes magazine, and as one of Newsweek’s 100 most respected Japanese people in the world in 2023.

｜Interview/Text: Takayuki Masuda
｜Photo: Airi Okonogi