Tokyo FinTech
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Tokyo FinTech

Set Japanese crypto exchanges free!

There are 31 licensed cryptocurrency exchanges in Japan, with another six “Type II” members of the Japan Virtual and Crypto asset Exchange Association (JVCEA) presumably waiting for admission to this no longer so exclusive club.

To date, every exchange had to file an individual application to list any particular token/coin. The outcome of such procedure, quite predictably, is that Japanese cryptocurrency exchanges, although operating under one of the first regulatory regimes (in force since April 2017), have fallen behind the global competition, and are for the most part operating unprofitably.

The 31 exchanges have currently 46 different tokens listed, some of which are only available on a single exchange. Also, some exchanges are operating with a number of listings in the low single digits. The table above, compiled by the JVCEA, shows all the tokens as rows and the exchanges as columns. It indicates a “listing density” of 17%, i.e. across the whole universe of Japanese cryptocurrency exchanges, less than one fifth of the opportunity of trading a particular coin on a specific exchange has been exploited. Obviously, it is 2022 now, and there are far more than 46 tokens that are of interest to a cryptocurrency investor.

Hence it is good news, and a viable first step that the JVCEA announced it will “green list” 18 of the most common tokens, so that these can be listed on any exchange without requiring further approval. That should immediately catapult the “listing density” into the 40% range.

However, a comparison of all the JVCEA members with Coinbase based on end-of-year 2021 data, as reported in the Nikkei Asia this week, demonstrates how far behind the Japanese cryptocurrency exchanges have fallen. Coinbase alone lists about 100 more tokens that all the JVCEA members combined, and has approximately 30 times as many crypto assets in custody. Even if you take into account that roughly two thirds of the Coinbase volume appears to be institutional business, the exchange has still been wildly more successful even on the retail side.

It does not feel like a stretch to say that Japan does not need 31 cryptocurrency exchanges. Inevitably, industry consolidation will set in. However, before the consolidation step, we could observe some recent deal flow leading to ownership changes. After Quoine/Liquid got hacked and took an emergency loan of USD 100m from FTX, it ultimately got acquired by FTX. Amber Group recently announced the acquisition of DeCurret. And Coincheck, acquired by Monex Group for USD 34m after it got hacked in early 2018, announced that it plans to go public through a US SPAC deal valued at USD 1.2bn. This might be Oki Matsumo’s best deal ever.

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Norbert Gehrke

Passionate about strategy & innovation across Asia. At home in Japan. Connector of people & ideas.