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Here’s Why Japan is the Most Important Market for Crypto in East Asia

This is the 3rd article in the series which covers the importance of the G20 countries in the global legalization of crypto.

The East Asian country of Japan is a world leader when it comes to innovation, especially in electronics. It has lived up to its reputation when it embraced crypto as a mode of payment.

Cryptocurrency initially was seen from a positive lens in Japan. It was seen as a novel way to make payments. But later the Government became stringent on compliance.

Japan is considered an important market for crypto due to many factors explained below.

Some Important Statistics About Japan

Japan is the world’s 3rd largest economy with a GDP (Nominal) of USD 5 trillion in 2020.

It has a population of 12.5 crores, making it the 11th most populous country in the world.

The country holds 7.3% of vote power in the World Bank, 6.21% of votes in the International Monetary Fund (IMF).

As per the market size and domination in international politics, Japan is an important market for crypto.

But it hasn’t fared well when it comes to adoption.

It ranks a lowly 82 in the Chainalysis Global Crypto Adoption Index and 72 in Global DeFi Adoption Index. Japan has fared well in on-chain value received and on-chain retail value received, but the P2P exchange volume does not rank well globally.

Chainalysis has mentioned in its report that Japan has low grassroots level adoption. 

32% of the total cryptocurrency received went to DeFi protocols in Japan.

Overview of Crypto Regulations in Japan

Till 2014, crypto was seen as a payment mode. That year, the infamous Mt Gox hack took place.

It changed the future of crypto in Japan forever.

Following the hack, the Government took cognizance of the matter and began forming guidelines on digital assets.

The Payment Services Act was brought in 2017. It mandated crypto exchanges to register with the Government. The law then used to refer crypto as “Virtual Currency”.

In 2019, revisions were made to the “Payment Services Act”. The term “Virtual Currency” was revised to “Crypto Asset” in the laws. Restrictions on custodian services were tightened.

Government also revised the Financial Instruments and Exchange Act (FIEA) which introduced the concept of electronically recorded transferable rights (ERTRs) to define Initial Coin Offerings (ICOs) and Security Token Offerings (STOs), according to Japanese law firm Anderson Mori & Tomotsune.

These laws came into effect in 2020.

Government also asked the crypto exchanges to implement the FATF Travel Rule in 2021.

In December 2021, Financial Services Agency (FSA) announced that it would bring a legislation in 2022 to limit the issuance of stablecoins to banks and wire transfer companies, according to a report from Nikkei Asia

Japan wants to regulate crypto but keeps investor protection paramount. It will become the leader in East Asia if crypto gets regulated. After the Chinese crackdown, it virtually became one.

News recommendation: Argentina: the Sleeping South American Crypto Giant

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