Growing Cryptocurrencies in Japan You Shouldn’t Miss
June 23, 2017
Since 2016, the cryptocurrency and blockchain market has been growing in Japan. With the way the market has been going, it becomes important to understand the underlying blockchain technology, and figure out how Pointwest can utilize it and innovate solutions for customers in the finance sector.
Major Japanese banking and investment firms have utilized cryptocurrencies to make it easier and more affordable to send money to foreign countries. It usually costs several thousands of yen per transaction to wire money internationally, but with cryptocurrencies, users can conduct low-cost international money transfers. Japan has also taken interest in virtual currencies in line with the coming 2020 Tokyo Olympics since the number of foreign tourists in Japan is expected to increase due to this sports event.
Japanese Financial institutions and investment firms such as Strategic Business Innovator (SBI) Holdings, Mitsubishi UFJ Financial Group, Inc. (MUFJ), and Mizuho Financial Group are focusing their attention to developing platforms for international money transfers and have invested in the leading cryptocurrency technology companies such as Bitcoin, Ripple, and Ethereum.
J.P. Morgan Chase, Microsoft, and Intel have collaborated to create Ethereum (ETH), a cryptocurrency and Blockchain- based platform, said to rival Bitcoin in the cryptocurrency market.
In the Ethereum blockchain, users mine Ether, a tradable cryptocurrency that fuels the network. Users such as application developers also earn Ether to pay for transaction fees and for services on the Ethereum network.
But Ethereum is more than just money. With Ethereum, developers or programmers can also build and deploy decentralized applications or DApp, which has its advantages.
The increase of the number of platforms supporting this cryptocurrency is evidence of the rising interest in Ethereum. In 2016, one of the top four Bitcoin exchange platforms in Japan, Coincheck, added Ethereum to its list of accepted cryptocurrencies, helping Ethereum gain more exposure in the country. Users can now buy and sell Ether through credit cards and international wire transfers.
In 2017, Google-backed Ripple (XRP) experienced a 100% increase in value within 24 hours of their announcement of new global investors and partners. These companies also plan to utilize Ripple’s technology, which could also increase the demand for the currency.
Japanese banks and investment firms such as Mizuho Financial Group and the SBI Holdings Group have collaborated to promote a project that develops a platform to transfer money internationally using Ripple. The two firms also joined a consortium of more than 70 of the biggest financial institutions worldwide to address the issues of international money transfers and exchange — high costs and settlement delay.
Unlike other cryptocurrencies, Ripple can be transacted with any unit of value (e.g., fiat currency, frequent flier miles). This would benefit banks, especially on interbank settlements. With RC Cloud, a cloud-based payment transfer platform, transactions can be more seamless, and users will be able to facilitate real-time P2P transfers both within Japan and internationally.
In 2009, a programmer or a group of them under the alias Satoshi Nakamoto invented Bitcoin, a cryptocurrency and virtual money system that allows anonymous transactions and eliminates transaction fees and middlemen. With Bitcoin, international payments are cheaper and easier because there is no regulation nor a single entity controlling it.
The usage of Bitcoin in Japan has been growing continuously. Coincheck reported that there are 76,400 Bitcoin Japanese users as of January 2017, compared to 14,000 users back in April 2016. The Bitcoin usage further increased after the Japanese government recognized it in April 2017 as a legal method of payment similar to prepaid cards and gift certificates. Bitflyer, a leading bitcoin exchange platform in Japan, revealed that they reached nearly 600,000 users after the recognition.
An added advantage for Japanese users is that they do not have to pay foreign exchange fees when using Bitcoin, compared to paying 3% commission when exchanging foreign money to Yen. The Japanese government has also eliminated the 8% consumption tax starting July.
New Regulations on Cryptocurrency Exchanges
In 2014, Mt. Gox, the former world’s largest bitcoin exchange platform based in Japan, went bankrupt to the tune of JPY￥8.2 billion in customer deposits. Because of this, users became cautious in using cryptocurrencies and started demanding for regulation of the cryptocurrency industry.
To encourage the use of cryptocurrencies and protect consumers, the Japanese government created a virtual currency regulation.
In summary, these regulations state that:
- Virtual currencies are recognized as a legal form of payment.
- The operators of virtual currency exchanges must register with the Japanese Financial Services Agency (FSA), and that the FSA can issue administrative orders and conduct on-site investigations.
- Operators or exchanges must follow the “know-your-customer (KYC)” practices.
- Operators are required a minimum capital reserve of JPY ￥10 million and the separation of their assets from customers’ assets to ensure clarity in case of bankruptcy.
- It is mandatory for operators or exchanges to send annual financial reports to FSA.
- Lastly, operators or exchanges will be responsible for protecting the user’s personal information and should have the appropriate security protocols and/or tools in place.
Before the regulation, Japan was the only country of the leading industrial economies that taxes virtual currency purchases. Now that the Japanese government has eliminated the tax and exchange fees, and implemented regulations, it is hoped that more Japanese will be encouraged to give cryptocurrencies a try.
“The underlying technology of cryptocurrency, blockchain, can also be considered in other business uses cases; anything of value can be traded or transferred and likewise provide a shared single source of truth for transactions and identity in different industries.” Jan Jaudian, Pointwest Solution Architect
Founded in 2003 by pioneers of the Philippine Global Sourcing industry, Pointwest creates value for its list of satisfied clients — including top Fortune 100 and local companies — with world-class IT and BPM services backed by international-standards methodologies and innovative practices.