Japanese banks are set for embracing Bitcoin after proposed new laws. Has Bitcoin finally come of age in the land of the rising sun?
On March 4, 2016, The Japan Times reported that the Cabinet in Japan had approved a series of bills which would help the banking sector expand their reach when it comes to Information Technology businesses. This intertwining of banking and IT are called ‘FinTech’ in emerging parlance.
Interestingly, the cabinet also takes into stock the rising importance of virtual currencies and the new bills will recognize them as a means of making payments and having the potential to be digitally transferred.
Japan has just given virtual currencies legitimacy, something that many other nations are still struggling to come to terms with.
So Saito, Attorney at Law who specialises in Virtual Currencies, says to Cointelegraph:
"I think that new law will advance an acceptance of Bitcoin and other VC. Some of major financial institutions, investors, and advertising agencies etc. have hesitated being relevant with Bitcoin. The reasons are that Bitcoin is not regulated, the nature of it has been uncertain and some still have a bad impression on Bitcoin."
Sunrise for Bitcoin in the land of the rising sun?
The government in Japan is attempting to bring virtual currencies under the purview of the Financial Services Agency (FSA), the same Japanese agency which manages transactions that take place in Japan’s own currency, the Yen. This will also mean that there would registeration of exchanges which handle virtual currencies aimed at preventing money laundering and extending more protection to the people who use Bitcoin and other such currencies.
“We believe this movement is positive for Bitcoin and the cryptocurrencies communities. Since the Mt. Gox incident, the majority of people in Japan didn't trust Bitcoin thinking that Mt. Gox was Bitcoin. People thought Bitcoin was money used for fraudulent activities. Legally accepting Bitcoin as similar to fiat money will change how people perceive Bitcoin and cryptocurrency in general. This government's move has a huge impact in helping Bitcoin to be acknowledged by the general public and will speed up an integration of Bitcoin by other businesses. Also, since Japan is one of the first countries to treat the Bitcoin as fiat money it is of major importance. It will be a great opportunity for Japan to show that they are actively pursuing innovative technology throughout the country.”
However, Takao Asayama, CEO of Tech Bureau Corp (Zaif Exchange), strikes a cautious note and says:
“Japan considers whole virtual currencies, including cryptos, as "circulation". It's an extension of payment method. The law requires certain capitalization and registration at the FSA, and forces segregated management of deposits to exchanges. However, it is not fully pictured how cryptocurrencies can be segregated and audited. The good part of this new law is that we can wipe off most of the fraudulent "HYIP coin schemes" but I am afraid that it will also eliminate small tech startups benefiting from crypto technologies.”
Bringing Information Technology to Banking
The banking sector in Japan would benefit the most from the proposed laws. Already the banks in Japan are more open-minded about Bitcoin than their European peers who seem to shut the doors to people who are active participants in the crypto world.
Jeremy Wood, Co-founder and CSO of Input Output, a company which operates in Hong Kong and Japan, says:
“I think in some respects, the banks have already accepted Bitcoin. Japan doesn’t have the bank closings that happen to Bitcoin companies.”
So are the Japanese banks ready to take a huge leap of faith and start embracing Bitcoin?
Takao Asayama of Tech Bureau Corp (Zaif Exchange) thinks so and told us that things started changing in January 2016 because before that in 2015 virtual currencies were, in his words, “Voldemort” to the banks in Japan. He says that in January 2016, Japanese banks started running experiments and started talking about cryptocurrencies with “smiles” to the media. Takao is of the view that they are getting ready to adopt it as a part of business when the law comes into force next year.
Kaga of Coincheck.jp also chimes in with his view that since the announcement banks are showing an interest in Bitcoin and other virtual currencies. He thinks this would mean more opportunities for established Bitcoin and cryptocurrency exchanges. However, he feels that due to increased regulations startups might face more difficulty in entering the market.
Women may play a key role in Bitcoin adoption in Japan
Japan is unique in the world of personal finance since many financial decisions are taken by the women of the household. It is well known that many men receive a fixed allowance from their wives, who are mostly homemakers. This allowance is known as okozukai and while men can entertain themselves with this money, they mostly have little say in the household finances. Japanese women are considered the money managers and investment wizards. In an environment where interest rates are zero and sub-zero, the Japanese housewife is on the look-out for new and interesting investment options.
In fact, Jeremy Wood’s, Co-founder of Input Output, Japanese wife’s inquisitiveness about Bitcoin took him by surprise.
He says to Cointelegraph:
“I was very surprised when my wife told me she wanted to buy Bitcoin. The Japanese are interested. Even my wife’s mother was asking questions about Bitcoin.”
Jeremy does think though that while Bitcoin would be attractive to the Japanese as a form of investment, he hardly thinks they would use it for transactions as Japan is a very cash (paper money) oriented society.
The Road Ahead
Japan has paved the way for Bitcoin and other virtual currencies to play a role in the country’s financial system. This way these currencies can be better regulated and managed within the country.
The technology behind these currencies can also be utilised by the existing banking system. This will certainly give Japanese banking system an edge on early adoption. This does not mean though that Bitcoin has a status parallel to the Japanese Yen.
Charles Hoskinson, Co-founder and CEO of Input Output, observes:
“In terms of a government's perspective, until you can pay your taxes with it, it's not on par with the government's money.”
However, the new laws proposed by the Japanese cabinet are a largely welcome step and something that other jurisdictions can take inspiration from.