Cryptocurrency In Japan: Lessons Learned
Cryptocurrency in Japan is much more than Satoshi Nakamoto (although we aren’t even sure he originates from this country). Thanks to crypto-friendly legislation, Japan has become the country of the rising sun for numerous cryptocurrency and blockchain companies. Not all of them ended up well (remember Mt. Gox, the exchange hacked for $460 million?). But for thoughtful governments, this is not a disaster, but a lesson to learn. Today Japan has a strict, yet comprehensive regulatory environment; cryptocurrency here is welcome, and you can buy almost anything for it. Let’s see how Japan managed to provide this level of crypto adoption.
Tough early days
Remember how the crypto market looked in the early 2010s? It was nothing but a bunch of enthusiasts working on something interesting to geeks only, the governments didn’t take it seriously and weren’t eager to regulate it. For some projects, that didn’t end well.
Mt.Gox, a cryptocurrency exchange founded in 2010 by developer Jed McCaleb, wasn’t really a crypto-focused platform from the beginning: since 2007, it had been selling playing cards for the ‘Magic: The Gathering’ board game. In 2010, it took off as a crypto platform meaning to become the biggest Bitcoin/Dollar exchange.
What does this have to do with Japan, though? In 2011, the exchange was sold to Mark Karpeles, a Linux developer. He was inspired for the purchase by Roger Ver, an early investor in Bitcoin, who was based in Japan at the time. The exchange got registered in Tokyo.
By 2014, Mt.Gox handled up to 47% of all Bitcoin transactions in the world. But in February that year, the platform got hacked with $460 million in Bitcoin being stolen — 6% of all BTC sully back then. Hackers obtained the private keys and took the money. Mt.Gox went bankrupt, Karpeles went to jail for falsifying the records during the investigation.
The faith in cryptocurrency was shaken. Everyone was waiting for decisive actions from the Japanese government, and the authorities heard their voice: measures to regulate crypto exchanges and protect investments were taken.
Importantly, the theft didn’t halt the crypto space from evolving further. In 2016, cryptocurrency in Japan was recognized as a type of money, which wasn’t reversed even after 2018, when $600 million in cryptocurrency were stolen. To maintain order, the Financial Services Agency (FSA) was established. This authority sets standards of operation for the crypto services in Japan.
Thanks to these initiatives, three following brilliant startups were founded in Japan:
The Japan’s largest cryptocurrency exchange Bitflyer was launched in 2014, a few months before Mt.Gox was shut down. Today, they boast of over 2.5 million users, and licenses in the United States and the EU. Bitflyer’s API is used by many other crypto services, integrating their tools on their platforms.
The blockchain in Japan is evolving not only thanks to the cryptocurrency but also following the adoption by enterprises. Soramitsu helps businesses, universities, and governments take advantage of blockchain technology. Among their clients, there are Honda, Panasonic, Sony, and Hitachi. A payment system by Soramitsu helps banks with the advanced fintech infrastructure, while Japan’s central bank gets new tools to monitor the activity on the market.
Credify is another blockchain startup that deals with something not less vital than money. The company provides decentralized identity solutions — when a person can show cryptographical evidence that they are who they claim to be. This helps users control their personal data and access convenient financial services.
What can you buy with cryptocurrency in Japan?
A friendly environment led to the reality where you can buy basically anything for digital coins in Japan. This is food in small restaurants or in Daily Yamazaki shop, coffee and homeware, glasses at Megane Super. You can pay with crypto for lessons at musical schools, rooms at hotels. Some multi-billion companies like GMO offer their employees to receive bitcoin as salary. All this is possible because society is getting more tech-savvy and there is a demand for the ability to use cryptocurrency in real life.
A 3-day BCH survival challenge in Tokyo
In 2019, a Tokyo resident, organizer of the local Tokyo Bitcoin Cash meetups Akane Yokoo decided to live 3 days on nothing but cryptocurrency in Tokyo. No cash allowed! Akane took her Bitcoin Cash wallet and went to pay in restaurants, bars, stores, and etc.
Some entities accepted cryptocurrency directly, while the others did it via third parties. For instance, Akane could fill up her Rakuten Edy card through the Japanese exchange Decurret and pay in any Edy shops in the country.
In her journey, Akane used a Tokyo BCH map — and not only did she survive, but also loved the experience. Tokyo is really a crypto city where you can pay with digital coins for barely anything. This is impossible in 2021 even in the most advanced world’s capitals.
Digital Yen trials
A logical step in the further promotion of cryptocurrency infrastructure in Japan was the creation of CBDC, the Central Bank Digital Currency. On April 5, 2021, trials took off aiming to test the concept of the digital yen. In this year-long test, the issuance, distribution, and redemption of coins will be checked.
The digital yen is to help Japan make a leap forward in the modernization and digitalization of the country’s economy. Cash is still widely used in the country, while many financial services are only available during banking hours. Central bank claims to raise the efficiency of finance in Japan through the implementation of CBDC.
You and your cryptocurrency are welcome in Japan
The example of Japan shows the entire world that the country only wins from adopting cryptocurrency. New businesses open, new technologies evolve, which ensures the influx of qualified workforce and investments. Citizens can use the type of money that they want.
Reality shows that nothing horrible happens when crypto is adopted on a state level. Only mistrust of the authorities hinders the new technologies advancement. We hope that more governments in the world will pick up Japan’s slack and build a cryptocurrency-friendly environment.