Major events of 2017 in the Asian ICO Market — Part 3: Japan

A three part exploration of the year’s developments for the major Asian crypto economies, and a glimpse at what 2018 may hold

See the Introduction and Part 1: China here. See Part 2: South Korea here.

Japan

Despite being a famously risk-averse country, Japan has a forward-thinking approach toward cryptoassets. Japan has accepted Bitcoin as a legal tender and has attracted global fintech companies, giving them a head start in the digital currency revolution.

Unlike China and South Korea, Japan have issued warnings to the public about the risks of token sales rather than banning them outright. There have been some concerns that Japan’s acceptance of cryptocurrencies may not apply to ICOs and other cryptoassets: “Japan’s not really ICO-friendly. [Regulators] are just more tentative.” Koji Higashi, co-founder of digital token wallet IndieSquare, notes, “They’re just trying to figure out if it’s going to be good or bad.”

Like China and South Korea, Japan also has a very large cryptocurrency market. It is currently the largest bitcoin market with a share of over 61% of global trading volume. While the vast majority of Japanese people and corporations are extremely conservative, in the past three years, cryptocurrencies have become relatively mainstream. This familiarity has enabled ICOs to experience correlated growth.

Japan has come a long way since the Mt. Gox incident in 2014, wherein Mt. Gox, the world’s largest bitcoin exchange, had 850,000 bitcoins stolen. While it looks like Japan won’t be banning ICOs anytime soon, the FSA (Financial Services Agency) may require heavier involvement in 2018 if the public appears to be treating ICO trading as gambling.

Japan has some 3.2 million people addicted to gambling, most famously in the ubiquitous Pachinko Parlours (similar to US slot machines and generating 4–5% of Japan’s GDP in gross revenue). Correlations have been drawn between the wide-scale uptake of cryptoassets and the gamified get rich quick mentality tied to Pachinko Parlours.

Looking Towards 2018

2017 represented a year where cryptocurrencies and ICOs may have crossed the chasm; spilling from niche tech communities into the mainstream public. Although it’s impossible to predict Asia’s 2018 ICO market, it will be interesting to see the impact of contrasting views between China strict approach, South Korea’s middle ground of intervention, and Japan’s open policies.

One of the most powerful tools a government uses to control the economy is to manipulate the supply of money. Cryptocurrencies and ICOs challenge government’s control and power as they shift the centre of gravity away from institutions. Each government will devise different responses to decentralisation. ICO regulations and policies will come face-to-face with a new marketplace that can transcend borders and will likely grow in unexpected ways. The major Asian markets will prove one of the most dynamic testing grounds.