Sendai City in Miyagi Prefecture, which is part of one of Japan's national strategic special zones, recently proposed three regulatory reform proposals related to Web3 to the Japanese government, calling for deregulation of crypto assets and DAOs. In this proposal, the city of Sendai asks for provisions to allow the acquisition and holding of governance tokens under certain conditions, relaxation of DAO regulations, and clarification of taxation standards. The City of Sendai pointed out that there are several problems with the current regulation: 1. there are problems with taxing long-term holders of governance tokens at the end of the accounting period and the accounting basis is unclear; 2. the law related to DAOs is inadequate and the new organisational system should be recognised as limited liability and various registrations of members are necessary; 3. the acquisition and holding of governance tokens is not allowed in the current law for investment business limited liability portfolios (LPS) This makes it difficult to raise funds quickly. In order to address these issues, the City of Sendai proposes the following changes to the current law: 1. Governance tokens owned by companies or used for non-speculative purposes will only be taxed and accounted for if they actually generate profits through trading, etc. 2. Consider improving the law by referring to the DAO Act in Wyoming, USA. 3. Certified LPSs will be able to acquire and hold governance tokens. 4. business entities to register to practice in the crypto-asset trading industry (same proposal as Fukuoka City).