10 Apr Why is Japan betting big on bitcoin?
Regulators around the world have clamped down hard on cryptocurrency, especially fishy ICOs and pseudo securities.
Why, then, is Japan so out of step with the global family of regulators? After all, it’s home to two of the biggest cryptocurrency exchange frauds ever – Mt Gox in February 2014 and Coincheck in January of this year. We’ll explore this unusual evolution of bitcoin in Japan further in this post.
Come to Bitcoin Jesus
A Bloomberg podcast explores the early days of bitcoin in Japan through an interview with Roger Ver, also known as “Bitcoin Jesus” for his early evangelizing about the cryptocurrency after moving to Japan in 2006. The podcast also interviews with former CEO of Mt Gox Mark Karpeles, and other industry leaders.
After several successful business ventures made him a millionaire, Ver started investing in cryptocurrency in 2011 including Ripple, Blockchain.info and cryptocurrency exchanges Bitpay and Kraken. A self-described libertarian and anarcho-capitalist, in 2002 he was convicted in the US for selling agricultural explosives without a license on eBay.
He’s just one of the characters that make cryptocurrency tick in Japan and he exerts his influence even more widely promoting Bitcoin Cash through his businesses, speaking and his publishing venture Bitcoin.com. His “20 questions with Roger Ver” interview on Steemit is worth reading for more insight into this cryptocurrency influencer.
Cryptocurrency is big business in Japan
The Japanese yen and therefore Japanese investors are the biggest traders in bitcoin. Today’s data from Coinhills.com showed 254,602.80 bitcoin traded in Japanese yen (67.8% of total), followed by 75,386.21 BTC in US dollars (20.1%) and 23,287.24 BTC in Korean Won (6.2%).
According to Coinhills, Japanese cryptocurrency exchange bitFlyer.com today traded 220,802.80 BTC, or 20.4% of the 24-hour trading volume. Former Shanghai and now Taiwan-based Binance followed with 191,000.40 BTC (17.6%) and Beijing. headquartered Huobi, which has a relationship with Japanese financial services conglomerate SBI Group traded 126,756.06 BTC (11.7%).
After the 2014 Mt Gox failure, the industry imposed voluntary restrictions to try to stabilize the cryptocurrency industry. Yuzo Kano, bitFlyer co-founder and CEO, is one of the advocates who pushed for legalized cryptocurrency trading.
After two years of work, on May 25, 2016 regulators officially recognized bitcoin and digital currencies as a “means of payment that is not a legal currency” under Japan’s Payment Services Act. The new regulations required exchanges to adopt know your customer (KYC) and anti-money laundering (AML) guidelines but were generally regarded as friendly and encouraging to cryptocurrency development and businesses.
On January 26, 2018, the Coincheck hack provided another big test for regulators and investors. Some felt the new laws had failed to protect investors.
Regulators evaluated the operations and security of the 16 existing cryptocurrency exchanges and forced them to meet new, more stringent licensing guidelines, particularly for security.
Two exchanges – Mr. Exchange and Tokyo GateWay – closed and three others planning to open – Raimu, bitExpress and Bit Station did not proceed with licensing and closed. Coincheck was forced to pause operations while it improved security. Impressively, because of the huge revenue earned by Coincheck, it paid back investors for their losses within two months.
The industry and investors breathed a sigh of relief that another Mt Gox disaster did not occur. Imagine the loss of face, not to mention investor confidence?
Recently, the Japanese government published a website page to inform consumers about the risks of cryptocurrency investments and it continues to closely monitor cryptocurrency exchanges.
Coincheck has been purchased for $34 million by Monex, a traditional securities trading firm. With this validation. It looks like mainstream investment firms are looking at the cryptocurrency industry in Japan with a fresh perspective.
The bankruptcy trustee for Mt Gox has been slowly paying back affected investors in full, with the proceeds of some recovered bitcoin now worth many times the value of the digital currency when it was hacked in 2014.
Investors and consumers seem to be comfortable with regulations, even though bitcoin and other cryptocurrency prices are still near record lows for the year.
Why is cryptocurrency trading so popular in Japan?
The big question is why has cryptocurrency trading proved so popular and so resilient in Japan?
The biggest reason according to some Japanese financial analysts is the history and active participation by Japanese investors in traditional foreign-exchange trading, which now totals $40 trillion. Banking and investments are big business in Japan and Forex trading shares similarities to cryptocurrency trading and that makes for a more informed base of investors.
According to Deutsche Bank analyst Masao Muraki, Japan accounts for about 50% of global foreign-exchange margin trading. In a recent analysis, he wrote, “We think that retail investors are shifting from leveraged foreign-exchange trading to leveraged cryptocurrency trading.”
The early history of bitcoin trading included quick adoption and fast growth partly on a fear of missing out (FOMO) but also because of Japanese media coverage of the industry and some of its early multimillionaire successes.
The government has been surprisingly liberal in regulating and legalizing cryptocurrency trading and it continues to monitor the industry closely, creating investor in consumer confidence. For the usually conservative Japanese investors, regulations have inspired confidence.
Some merchants have been pioneers in accepting cryptocurrency payments for goods and services, encouraging the spread of adoption.
There are also a couple of hard to explain features unique to Japan and its culture.
For example, there’s the mythical “Mrs. Watanabe”, used to characterize the Japanese housewife who runs the family household finances and who became an often referred to icon for “her” investments foreign-exchange during the 1990s recession in Japan.
Popular Japanese chat app Line, which has more than 200 million users, announced plans in late January to create its own cryptocurrency exchange. This will complement its mobile payment service and digital wallet now used by 40 million registered customers.
Then there are the pop culture connections and fascinations with cryptocurrency, leading to the popularity of J-Pop band Kasotsuka Shojo or the Virtual Currency Girls and their debut single “The Moon and Virtual Currencies and Me.” The group takes payment for concert tickets, merchandise and other products on their website in cryptocurrency of course. You can follow them on Twitter.
Then there’s Ms. Bitcoin, Mai Fujimoto, who talks about, blogs about and promotes bitcoin and blockchain technology through her PR consulting business. See her CNBC interview about bitcoin and a look at Japan’s embrace of cryptocurrencies.
Japan’s biggest e-commerce company Rakuten, announced plans to convert its $9 billion loyalty program into its own cryptocurrency – the Rakuten Coin.
What’s ahead for cryptocurrency in Japan?
Prices are at record lows for this year, but some bullish bitcoin analysts predict $25,000 bitcoin by the end of the year. With government support, strong cryptocurrency regulations and active investors, if there is a market for cryptocurrency, Japan will continue as the global market leader.
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