Big in Japan: How Bitcoin Went from Zero to Hero in Four Years
Japan is now the largest bitcoin market by volume. What does this mean for ICOs?
Japan is now the dominant ICO market in Asia, and one of the fastest-growing in the world. Internet and IT behemoth GMO recently announced a token sale. Financial services firm SBI Group announced no fewer than eight new cryptocurrency-based businesses. Furthermore, the country’s continental neighbors, dogged by blanket bans and restrictive legislation, are flocking to move their ICOs, with Coincheck claiming to have received “hundreds of requests from Chinese startups” requesting to list their tokens. Even local municipalities governing a few hundred people are getting in on the act, according to an announcement issued today by a village in Okayama Prefecture.
This is a dramatic turn of events, given the region’s checkered relationship with cryptocurrencies.
In 2014, when Tokyo-based bitcoin exchange Mt. Gox was hacked to the tune of 850,000 btc ($450 million), everyone thought the cryptocurrency’s march towards the mainstream would be severely waylaid. The scandal fed the national news machine for months. The government arrested and charged Mt. Gox CEO Mark Karpeles. The very word ‘bitcoin’ became associated with embezzlement, insolvency and fraud. Yusuke Otsuka of rival bitcoin exchange Coincheck described the Japanese view of cryptocurrencies in the wake of the scandal as ‘a scary thing.’
A few short years and a rebranding tweak later (the Japanese now prefer the term ‘virtual currencies’) the unthinkable has happened.
A law passed in April effectively recognized bitcoin as a legal payment method and brought cryptocurrency exchanges under the auspices of payment services regulations. Government-issued operating licenses are lending credibility and legitimacy to 11 bitcoin exchanges, and the country has 59.55% of bitcoin’s global trading volume sewn up. Singaporean bitcoin exchange Quoine — one of the eleven firms to receive an FSA license — said in a press release that it is working towards “towards the healthy development of the cryptocurrency industry within Japan and on a global scale.”
There’s no doubt about it, Japan has become one of the most cryptocurrency-friendly nations on earth. But how did it get here, less than four years after the Mt. Gox scandal broke?
Until recently, Asia’s bitcoin market presence was dominated by China, who controlled up to 13% of the global trade; South Korea was jostling for second place. Then, both governments effectively shut down their respective cryptocurrency exchanges, banning all related activities (including ICOs).
These events, in combination with the legislation recognizing bitcoin as a legal currency, left the field wide open for Japan to step in and enjoy explosive growth in crypto trading. The moment China started slapping fees on bitcoin trades, Japan’s monthly volumes went up by 8,900%. Then, in October, the Japanese government explicitly endorsed ICOs.
Considering the legal, financial, technological, and economic complexities of digital currencies, the one-and-a-half page official statement Japan released last month is disarmingly simple and to the point. It begs the question, if endorsing ICOs is this easy (issue a public warning about the pitfalls and risks inherent in an investment opportunity, remind businesses of their regulatory responsibilities, and provide contact details for further advice) why can’t every country do it?
Reaction in the crypto community has been mixed. While official government recognition and its attendant regulations is good for building trust, there is concern that creeping legislation may stifle startups. Mostly though, token evangelists see Japan’s uniquely proactive approach to cryptocurrency regulations as a positive step towards global legitimacy. The full extent of the ramifications of this approach remain to be seen.
