With stringent regulations already in place to help protect FTX Japan and its investors from severe losses, Japan is committed to policies and guidelines for stablecoins, NFTs, and DAOs to embrace the future of cryptocurrencies. I’m in.
“While many other countries pause and shrug their shoulders, Japan is poised to play its role in the cryptocurrency industry.”
This is a proposal from his Web3 project team for Japan’s ruling Liberal Democratic Party. In other words: While other countries fear danger, Japan sees opportunity.
After a recent trip to Tokyo, it’s hard to stress that Japan is out of sync with much of the world. The people I spoke to were particularly troubled by the FTX meltdown and the series of cryptocurrency implosions that preceded it. It didn’t look like it was. Masaaki Taira, a member of the House of Representatives and a member of the ruling Liberal Democratic Party’s Web3 project team, said the FTX crash “didn’t have any impact on policymaking.”
Promoting Web3 remains part of Japan’s national strategy as legislators and regulators from the US to Europe to Asia grow wary of cryptocurrencies. A small but active group of politicians are proposing policies on everything from decentralized autonomous organizations (DAOs) to non-fungible tokens (NFTs). It’s getting easier and easier for Japanese exchanges to list their tokens.
With tight regulations already in place that helped insulate @FTX_Japan and its investors from heavy losses, Japan is working on policy and guidelines for stablecoins, NFTs and DAOs as it welcomes a crypto future.— CoinDesk (@CoinDesk) January 29, 2023
A #longread from #policyweek: https://t.co/iOiE7pBiTj
Onerous tax requirements have been revised, a major benefit for crypto entrepreneurs. Coinbase and Kraken have pulled out of Japan, while Binance, which has angered Japanese regulators in the past, has successfully acquired a Japanese exchange. And new avenues are opening up for stablecoins that are not currently listed on Japanese exchanges.
Ghosts of hackers past
The simplest explanation might be that Japan has already gone to hell and back when it comes to cryptocurrencies. We have proven that we can weather storms. So now some of the old fears are gone.
Japan was a pioneer in cryptocurrency but fell short shortly thereafter.In 2014, the Japanese exchange Mt.Gox was hacked. Then, in early 2018, the hacker struck again, stealing over $500 million from the Japanese exchange Coincheck in the biggest hack in crypto history. Shortly before the Coincheck hack, Japan was poised to become the crypto capital of Asia, if not the world. For a while, listing a new token on an exchange seemed almost impossible.
It turns out that Japan wasn’t gone, it just needed time to put things in order. After these hacks, Japan separated customer assets from exchange assets and required most exchange assets to be stored in cold wallets. Demonstrated.
Ryosuke Ushida, chief fintech officer of the Financial Services Agency, the government agency that regulates cryptocurrencies, said, “FTX Japan’s Japanese customer assets have been severely impacted by the global Chapter 11 bankruptcy filing. It will likely be returned without payment.”
“In most jurisdictions, there is no segregation of crypto assets. In Japan, they are legally segregated, which makes it easier for FTX Japan to refund.”
“Our reason for requiring this type of asset segregation is that lessons have been learned from previous incidents such as the Mt Gox and Coincheck hacks. Fortunately or unfortunately, crypto is used for these types of emergencies. We know our stuff compared to other jurisdictions,” Ushida said. FTX Japan may allow user withdrawals as early as February.
Stablecoins enter Japan
Before the FTX debacle, Terra’s terraUSD (UST), the algorithmic stablecoin that collapsed in May, collapsed. This has raised concerns around the world about the stability of stablecoins, which play an important role in crypto trading. These stablecoins claim to be pegged to 1.
1 for fiat currencies like the US dollar, the question is whether the issuer has a legal reserve to support these claims.
Various stablecoin proposals are flying around in Washington DC. The European Union is in the final stages of approving stablecoin regulations in its Crypto Asset Market (MiCA) Regulations. Singapore has also proposed rules for stablecoins. But for the most part, regulations have not yet taken hold.
This means Japan could take the lead.
“Japan could become the first country to regulate unlicensed stablecoins. The US is still debating how to regulate stablecoins. Japan’s stablecoin law will be effective in June 2023. ,” said Tatsuya Saito, product manager of the digital planning office at Japanese bank MUFG. MUFG is leading a consortium of banks and trusts launching stablecoins on both private and public blockchains like Ethereum. The software platform, known as Progmat, is expected to launch later this year.
So while other jurisdictions are trying to contain stablecoins, Japan is cautiously going in the opposite direction. That’s because stablecoins are now essentially not allowed in Japan at all.
Mr. Ushida of the Financial Services Agency said, “Tether, USDC is not listed on Japanese exchanges.” to ensure that it can be reimbursed Thanks to the new rules, foreign stablecoins are now on their way forward. Starting in June, Japanese exchanges can apply for a special license to trade stablecoins.
This could allow foreign stablecoins such as Tether (USDT) and US Dollar Coin (USDC) to enter the Japanese market. But that doesn’t mean it will be easy. Saito said the dollar that underpins the stablecoins circulated on Japanese exchanges will likely require a system in which the underlying assets are escrowed with a Japanese escrow bank. This is a very strict requirement.
It may seem strange to welcome stablecoins at a time when much of the world is questioning their stability. While it’s not hard to imagine why Japanese investors and exchanges would want access to stablecoins as a store of value or as a gateway to other cryptocurrency products, the government’s motives are what?
One theory is that “the Japanese government wants to introduce a yen-based stablecoin into the global crypto trading system and increase the use of the yen around the world,” Saito said.
Coinbase has just pulled out of Japan in Kraken’s footsteps. Coinbase Japan users must make their final withdrawals by mid-February. Coinbase cited “market conditions” as the reason for its exit, but the decision affected profitability challenges in Japan due to tight regulation and the added challenge of entering a market that foreign companies have not entered. likely to have been an existing user base.
Operating an exchange in Japan is not easy. In addition to asset segregation and cold wallet rules, exchanges must entrust customers’ fiat currency to a Japanese escrow company or bank trust. There are also regular audits to ensure the exchange is complying with the regulations.
Takaaki Kato, Head of Sales and Trading at Bitflyer, one of Japan’s largest cryptocurrency exchanges, said:
“Failure to do so, regulations require crypto assets to be moved to a cold wallet within five days of him, but usually he is within 24 hours. It becomes easier.”
Japanese stock exchanges also need to hold capital to hedge their risks. “We need to budget for selling, general and administrative expenses (SG&A) for three months, and regulatory capital needs to exceed the amount at risk of about three to four times,” Kato said. said Mr. Some argue that such strict rules hurt profitability. But there are also advantages, especially in turbulent markets. “Bitcoin may continue to plummet, but there is still plenty of capital,” Kato said.