Japanese Prime Minister Fumio Kishida has a more positive attitude towards Web3 and cryptocurrencies than his predecessors. Can the cooperation between the Japanese government and private industry enable Japan to accelerate the development of Web3 in a straight line and occupy a considerable territory? (Recap:Japanese banking giant” Nomura Holdings invests in UK blockchain payment company Fnality ) (background supplement:Square Enix officially announced that it has joined the Oasys game public chain, and is tied for the first round of developers with Bandai, SEGA, Ubisoft.. )
thisOn September 22, 2019, Astar founder Sota Watanabe announced on his blog that Astar’s native token has passed the strict review by the Financial Services Agency and JVCEA (Japan Crypto Asset Exchange Association), and will be listed on the Japanese local exchange Bitbank.
“Listing in Japan is not our goal at all, it’s the starting line,” he wrote on his blog. At the same time full of arrogance:
What I’m trying to do is create products in the world that represent this era, and within the company we often say ‘Shine Like A Star’ – just like Toyota and Sony, so we want the next generation to want to be in the world Astar on stage.
However, compared with Sony and Toyota, which have long been well-known in the real economy industry, the listing of Astar in Japan has not caused too many waves in the Crypto circle-compared to this, people are more concerned about ETH The future of the forked chain after the merger, and Token2049, the largest blockchain conference in Asia, held in Singapore.
Even more cruel than the story is the reality. In the “2021 Global Cryptocurrency Adoption Index” released by Chainalysis statistics, Vietnam and the Philippines, both in Asia, rank first or second, the United States ranks fifth, and Japan ranks 20th. , ranking even lower than Nepal and Kenya.
Further reading:Chainalysis Global Cryptocurrency Adoption Index Report: Emerging Markets Like Vietnam Lead in Bear Market
Due to the isolation of geographical location and the lack of resources, the word “shou” has been implemented in the entire Japanese society from top to bottom, accompanied by a strict system of superiors and subordinates and cumbersome business processes – because once The original order has been destroyed, and it is almost difficult to rebuild it. But Japan has always been at the forefront of technological development. Modern technology products such as Shinkansen, Walkman and pocket calculators were also born in this country.
New things like Bitcoin that transcend the traditional financial system are both novel and worrying for Japanese who do not yet fully understand the crypto industry. It is precisely because of this that the Japanese policy side has been hesitant and capricious in the first half of Web3.
In the middle game of Web3, Japan no longer hesitates.
the beginning of everything
The earliest relationship between Japan and Web3 can be traced back to the invention of Bitcoin. When the white paper was completed, the pseudonym “Satoshi Nakamoto” with typical regional characteristics appeared on the paper, and Satoshi Nakamoto himself also claimed to live in Japan. In July 2010, Jed McCaleb, a programmer who just wanted to build a Magic trading website, used the purchased domain name on his new exchange.
Since then, the name Mt.Gox has been spread in the crypto world, and it has become the world’s largest cryptocurrency exchange, with millions of dollars in transactions flowing into Tokyo every day, and then spreading to the world through the Internet.
Believers and enthusiasts started to try more.
In 2013, Monacoin was first made public on the Japanese forum 2chan. The currency forked from Litecoin claims to be Japan’s first cryptocurrency and will become the only cryptocurrency payment method in Japan. Like many of the early projects, the founder did not reveal his name, only using “Mr. Watanabe” as his pseudonym. Mona attracted a lot of attention in 2014 thanks to the use of a cartoon cat as the icon for its token.
On New Year’s Day 2014, Monacoin announced its official launch, and introduced its origin and development in detail. Eight days later, former Goldman Sachs derivatives and bond trader Kano Yuzo founded the exchange BitFlyer in Tokyo. The company, with most of its employees from Goldman Sachs, grew wildly in the wild and became Japan’s largest exchange two years later. Place.
But the good times didn’t last long, and a hacker theft pushed the booming Mt.Gox off the altar. Although the team tried to recover the more than 700,000 bitcoins that were stolen, they were unsuccessful. Eventually, Mt.Gox declared bankruptcy, and a generation of giants fell to the ground.
Further reading:Mt. Gox repayment of nearly 140,000 BTC, delayed until mid-September, or continued for several months to several years!Alleviate the worries of smashing
At the same time, Mona began to receive a lot of attention from the local media. TEPCO reported this event in its own program: Someone bought a piece of land with Mona, just like the believers of Feitian Spaghetti Sect build their own church, this A fan built a special shrine for Mona and made a LOGO.
In order to protect individual investors from suffering huge losses in events like Mt.Gox again, Japan has taken relevant legislative actions. In 2014, the Financial Services Agency of Japan established a special working group to start investigating cryptocurrency payments and settlements in Japan business, the task force completed the following year and handed in a final investigative report that became the basis for a later cryptocurrency bill.
In the same year, the establishment of JADA (Japan Digital Assets Authority), an agency composed of blockchain and cryptocurrency start-ups and entrepreneurs, aims to create a favorable trading and business environment for cryptocurrencies, when the Financial Services Agency needs to formulate encryption JADA “lobbied and assisted in setting the rules of the game” when it came to currency bills.
In March 2016, Parliament passed bills to amend the Payment Services Act and the Funds Settlement Act, recognizing the legal status of cryptocurrencies, naming them “virtual currencies”, and requiring transactions to be required by the government. Register, while the bill also requires virtual currency exchanges to “notify relevant authorities when suspicious transactions are detected.”
Six months later, JADA announced the reorganization of a new organization, JBA (Japan Blockchain Association), which consists of two departments:
One deals with cryptocurrency-related matters, including consumer, tax, and financial regulatory issues, and is primarily responsible for BitFlyer, Coincheck, and Kraken Japan; the other deals with definitions and policy recommendations for non-monetary blockchain technologies, including Microsoft Companies including Japan, payment gateway GMO Internet Group and blockchain cloud computing platform Orb are mainly responsible for this part of the responsibilities.
On April 1, 2017, the revised bill came into effect. Before that, all 21 exchanges operating in Japan were classified as “virtual currency exchanges.” Exchange” and began to allow exchanges to apply to the Financial Services Agency for access permits.
Since then, the emerging industry of cryptocurrency has been officially included in the regulatory authority of the Financial Services Agency.
Further reading:LUNA Aftermath” Japan’s Congress passed the “Stablecoin Regulation Act”, and issuer regulations were introduced within a few months
Rules and Unruly
However, regulatory intervention cannot prevent theft from happening again and again. In January 2018, Japan’s local exchange Coincheck was hacked, and NEM tokens worth 500 million US dollars were stolen, which eventually became a historical phenomenon. One of the largest cryptocurrency thefts, this event has caused a huge shock in Japan.
In April of the same year, 16 local cryptocurrency exchanges, including BitFiyer, Coincheck, and Coinbase’s Japanese subsidiary, announced the establishment of the JVCEA (Japan Crypto Asset Exchange Association), which was officially recognized. The Financial Services Agency hopes to control the stable development of the industry through the self-regulation of enterprises. At the same time, enterprises can also dynamically assist in formulating policies according to the form to better protect the safety of investors.
Hacking continues, with Osaka-based exchange Zaif suffering from a hack in September that saw more than $60 million worth of cryptocurrencies including BTC, ETH and Mona stolen, with 68% of the funds coming from Customers, according to investigators’ report, hackers stole the cryptocurrencies from the company’s hot wallet.
These two events completely changed the government’s attitude towards the industry. Soon, the Financial Services Agency announced that it would implement “more stringent review procedures” for exchanges that apply for licenses, while “continue to inspect and remove companies that have not improved” on registered exchanges, including BitFlyer. Exchanges have been ordered to stop accepting new customers for “inaction to money laundering and terrorist financing” and have demanded improvements to their KYC systems, while some have withdrawn applications for admissions that were in progress.
At the same time, J VCEA and the Financial Services Agency inspected the exchanges and found that there are still many exchanges with huge security loopholes. As a result, the FSA did not issue access permits throughout 2018, and a large number of exchanges, including Binance, were forced to face a choice – either move out or close their doors.
However, the Financial Services Agency has always been in an extremely embarrassing position – almost all policy recommendations come from JBA and JVCEA, and the implementation of policies relies on the assistance of large enterprises in these two institutions. This led to the fact that the entire Japanese crypto industry was in a state of “capture regulation” in the early days.
It is precisely because the Financial Services Department that a large number of industry-related practitioners seek help instead of doing their own research when formulating rules, many aspects have actually fallen into a position that is not regulated and controlled. For example, there is no set of binding guidelines for asset storage, only Simply “prescribe” that exchanges should keep cryptographic keys needed to access digital currencies in “cold wallets” like disconnected USB drives – provided this does not cause undue inconvenience to customers, in fact This indirectly led to the theft of Coincheck and Zaif.
This embarrassing situation continues to this day, and at the FSA meeting late last year, the FSA twice warned the JVCEA and pointed out that the lack of communication between the association’s directors, its secretariat and member operators led to the organization’s mismanagement, while in Procrastination on specific work – in some cases, JVCEA review of a single cryptocurrency even takes six months to a year, and for most projects, this is almost the entire life cycle.
However, JVCEA also has its own difficulties. The staff of the office are mainly retirees from banks, brokerages and government departments, not employees of related encryption companies. Most of them are “contacting cryptocurrency for the first time” in their lives. At the same time, the association also has its own struggles, and in the end, it even evolved into the spontaneous formation of a union by the staff to “protect legitimate rights and interests.”
The way of exploration for local enterprises
When it comes to the development of blockchain in Japan, the most inescapable person is Yuzo Kano, the current president of JBA and founder of BitFlyer exchange. After graduating from the University of Tokyo, Yuzo Kano joined Goldman Sachs, where he worked on developing payment systems, before jumping back and leaving Goldman for the second time in 2014. After receiving an investment of 160 million yen, the local exchange BitFlyer was established in Tokyo. Compared with Mt.Gox, which is run by the French and mainly faces foreign markets, Kaye and BitFlyer focused more on local development in the early days.
A few months later, Mt.Gox fell to the ground, and a large number of local exchanges, including BitFlyer, began to divide their new territories over the corpse of the giant.
Kano has hired a large number of employees at his old employer Goldman Sachs and brought his experience in the traditional financial industry to the crypto exchange. Two years later, BitFlyer became the largest crypto exchange in Japan and the largest bitcoin exchange in the world. At the same time, BitFlyer also started its own overseas expansion. In November 2017, BitFlyer announced that it had obtained a license to conduct exchange operations in more than 40 states in the United States. In January of the following year, BitFlyer obtained the EU payment agency license and officially entered Europe. So far, BitFlyer has also obtained licenses from Japan, the United States and Europe, the three most stringent financial supervision regions, becoming the most compliant exchange in the world.
At the same time, BitFlyer is also actively promoting cryptocurrency retail payments in Japan, and vigorously cooperates with retailers and mobile payment companies. Offline stores including AMENRO LA FIESTA, Bic Camera and Numazu Port have begun to support the use of Bitcoin pay.
Not long after Kano founded BitFlyer, on the Keio campus not far from Dongda University, a young man was preparing to embark on a journey to India, where he first felt the seriousness of poverty and environmental problems, and at the same time germinated. The desire to solve these problems, after which he came into contact with the blockchain, and went to the United States to study related technologies and knowledge.
After returning to Japan, he entered Kano’s alma mater, and established Stake Technologies with his friends, and started his own technology road in the Polkadot ecosystem, but it should be better known for their products – Astar, based on Polkadot’s multi-chain multi-virtual machine DApp center. Astar has been known in crypto circles for a long time as the only “Made in Japan” known to the outside world.
Almost at the same time when the supervision began to be implemented, traditional Japanese companies also turned their attention to Web3, an area that has not yet been fully tapped. A typical case is Mitsubishi UFJ Financial, Japan’s largest bank by assets, which frequently cooperates with crypto companies such as Animoca, and plans to release a stablecoin in Japanese yen.
Further reading:Mitsubishi UFJ co-led investment, Animoca Brands Japan completed 45 million magnesium financing at a valuation of US$500 million
Many executives who used to work in traditional companies have also participated in blockchain startups and brought resource support from their former companies. For example, the national project Jasmy invited former Sony president and CEO Ando Kunitake as a representative director, while the game The dedicated chain Oasys has even brought in CEOs of traditional companies such as Bandai Nangong Meng and SEGA as consultants for their own projects.
long road
Newly-appointed Prime Minister Fumio Kishida has a more positive attitude towards Web3 and cryptocurrencies than his predecessor. In a House of Representatives meeting in May this year, Kishida said: “The arrival of the Web3 era may lead to (Japan) economic growth.” And In an earlier visit to the UK, he mentioned new “institutional reforms” to promote the development of new industries, including infrastructure related to Web 3. At the same time, Fumio Kishida also set up a policy office dedicated to Web3 under the Ministry of Economy, Trade and Industry, which is responsible for making recommendations on policies and industrial development.
Politicians of the current ruling party, the Liberal Democratic Party, have taken a more radical approach, determined to bypass the redundant and slow bureaucracy and directly promote the development of the industry. The Liberal Democratic Party set up a dedicated NFT policy working group this year, founded by Senator Masaki Hirai and led by former digital transformation minister Takuya Hirai. The working group released an NFT white paper in April this year, titled “Japan’s NFT Strategy in the Web 3.0 Era”, which pointed out that “the arrival of the Web 3.0 era is a huge opportunity for Japan” and has Recommendations were made on secondary sales, intellectual property and, most importantly, tax reform. At the same time, the working group recommends that the government appoint a dedicated Web3 minister and establish an interagency advisory group to meet the needs of businesses and government agencies for the growing homegrown crypto market.
Politicians are pinning their hopes on the government to re-establish a separate system of advisors outside of the old corporate interest groups to weaken the JBA and JVCEA’s influence on policy. At the same time, they also have their own considerations-after Abe’s assassination, the political balance that had been reluctantly maintained within the Liberal Democratic Party was completely broken, and the chaotic political achievements became the best chance for politicians to rise to power.
However, the reform is not easy, and the big companies that entered the market in the early stage are unwilling to have their influence on the policy side weakened. At the same time, with the United States and Silicon Valley regaining the right to speak in the world of encryption, Japan’s early advantages and leading ability in supervision are being weakened step by step. Strict high taxes have caused a large number of local talents to leave the Middle East and Southeast Asia. On the ground, the active competition of South Korea and Vietnam on the same track has made Japan feel the pressure – for Japan, the development road of Web3 is still long and difficult.
But in any case, Japan is no longer conservative in the wave of Web3, but takes the initiative, and the island is waving a baseball bat in the midfield, looking forward to the next cycle of home runs.
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