By 2020, it appears that the Japanese cryptocurrency industry has entered a mature stage. With the entry into force of new cryptocurrency laws in May, major stock exchanges have consolidated their leading positions, while cryptocurrency startups and unregulated companies have left the market. However, it seems that a winner has not yet been announced. The small country with a population of over 100 million already has over 25 registered exchanges, but global crypto giants are just beginning to enter the market. Some believe that the reorganization of a large industry takes place through the purchase of a license exchange. Given that the current bull market is expected to continue, we can see further expansion of crypto companies in Japan in 2021.
However, one question must be asked: should the industry really mature now? Just 12 years after the creation of Bitcoin, the entire cryptocurrency and blockchain industry is still in its infancy. Can we even predict the future development and organization of the industry? Organizational clarity can be an advantage, but letting it be ambiguous at this point – whether intentionally or not – as seen in the US and China, may be the right step for innovation.
Revised encryption laws
On May 1, Japanese lawmakers amended the country’s rules on cryptocurrency, the law on payment services and the law on financial instruments and stock exchanges. The new rules are aimed at addressing the vulnerabilities that were identified as a result of the hacking of Coincheck and the Zaif exchanges in 2018 and BITPoint in 2019. concern from regulators.
While the new rules will demonstrate the maturity of the industry in Japan and attract institutional actors, some managers and wallet service providers see them as over-regulated due to the high cost of complying with the regulations.
For example, on March 31, the blockchain-based social network Valu announced that they were discontinuing the service due to strict rules for digital asset managers. Valu allowed users to trade with their “individual value” using cryptocurrencies such as Bitcoin (BTC). Therefore, he managed the users’ money on their behalf. Valu commented: “Since the cryptocurrency storage service is a key part of VALU, if we can not keep it, we must radically change the management plan.”
The new rules apply to cryptocurrency exchanges outside Japan. In April, BitMex, one of the world’s largest cryptocurrency derivatives exchanges, announced that it would stop offering services to Japanese residents from 1 May. Japanese traders. Traders now turn to other derivative exchanges such as FTX and Bybit.
In October, Binance, another non-listed exchange in the Financial Services Agency, terminated its strategic partnership with TaoTao, a listing listed in Japan.
Reorganization of the industry in 2021
Meanwhile, the reorganization of the industry has become one of the hot topics for cryptography in Japan. The FSA has over 25 registered exchanges. For some companies, troubled businesses are attractive acquisition targets. Tsuneyasu Takeda, CEO of Exchangers, which aims to become Amazon in the cryptocurrency industry, told Cointelegraph Japan that he is in talks with some licensed cryptocurrency exchanges about partnerships or potential mergers and acquisitions.
Furthermore, worldwide cryptocurrency exchanges are entering the Japanese market. Kraken returned to Japan in September for the first time since 2018, and Coinbase is actively recruiting locals. When global cryptocurrency exchange giants enter an already competitive market, the selection process may intensify further in 2021.
Is Ripple coming to Japan?
Although tough, the clarity of Japan’s cryptocurrency laws seems attractive to some companies outside the country. Brad Garlinghouse, CEO of Ripple, named Japan as one of the candidates to move Ripple’s headquarters.
Garlinghouse criticized the lack of clarity in regulation in the United States and said that there are too many definitions of cryptocurrencies:
“Encryption is real estate, encryption is a commodity, encryption is virtual currency, encryption is security, and so on. Regulation should not be a guessing game.”
He also summarized why the company is considering moving outside the United States:
The lack of a unified national regulatory framework puts American innovations and American companies at a disadvantage. All we ask is equal terms – if we need to move to another country to get this, then this is the path we must take. ”
No new service
When the cryptocurrency industry experienced a decentralized economic boom in the summer, Japan was left behind. There was no crypto exchange in Japan that would launch services related to DeFi or these DeFi tokens in 2020.