In April 2017, Japan’s legislature made long-awaited revisions to the Banking Act and Payment Service Act, effectively making cryptocurrencies such as bitcoin and ethereum legal means of payment. Industry players hailed the development for clearing the way for new businesses and partnerships to develop. At last month’s Rakuten Fintech Conference 2017, experts discussed how these and other changes enhance Japan’s image as a technology innovator – and what they mean for the future of blockchain, the technology that powers bitcoin.
The 2014 collapse of Tokyo-based bitcoin exchange Mt. Gox cast a shadow over the local cryptocurrency industry that lingers to this day. But it also kickstarted regulations that have promoted growth. Now over 15 companies hosting virtual currency exchanges have registered with Japan’s Financial Services Agency.
Bitcoin players bet on Japan
One of those companies is Kraken, a San Francisco-based exchange that has been assisting authorities in resolving the Mt. Gox bankruptcy. Aya Miyaguchi, Kraken’s managing director for Japan, told conference attendees that she has been communicating the benefits of blockchain technology to regulators amid explosive interest in new startups issuing their own virtual currencies.
“Originally, when bitcoin started, the comments I received from people were mostly negative,” Miyaguchi said during an interview on the sidelines of the conference. “But members of the public have recently become knowledgeable about this area and now their main concern is to try to discover the next bitcoin.”
George Kikvadze is Asia chairman for BitFury Group, a venture-backed bitcoin mining company established in 2011 that now provides currency hardware and software solutions and has a presence in 17 countries. Kikvadze announced at the conference that his company is expanding into Japan.
“We’re betting big on Japan and we think there’s a huge opportunity,” said Kikvadze. “Last year, we had revenues in the vicinity of $100 million and this year we anticipate two and a half, three times that amount. So business is good.”
Miyaguchi also recognizes the potential for growth in Japan. “Japan is an interesting market, where the popularity of cryptocurrencies is growing quickly,” she said. “I think it’s going through a bubble stage, but I hope this market understands the true benefit of blockchain technology and will create more blockchain products.”
Bright prospects for blockchain
Yukio Noguchi, advisor at the Institute for Business and Finance, Waseda University and professor emeritus at Hitotsubashi University, gave his thoughts on the present and future of blockchain, the technology that allows virtual assets such as cryptocurrencies to be traded between two parties without the need for a third-party arbiter. Emerging uses for the technology include peer-to-peer (P2P) and parametric insurance, he explained. P2P insurance refers to low-cost, fintech-driven coverage that redistributes unused funds to its members, while parametric insurance refers to coverage with claims payments based on specified conditions instead of losses.
Other applications for blockchain include risk prediction markets, as seen in an ethereum blockchain platform developed by Gnosis, and blockchains for land registration, product traceability and medical records.
“Twenty years ago when the internet was born, most information was held by the government or media, but now it’s public and decentralized,” said moderator Ken Okamoto of Rakuten’s Blockchain Business Development Office, suggesting that blockchain will further accelerate this trend by allowing assets to exist and be traded in the same decentralized manner.
Looking into the future of the technology, Kikvadze noted that bitcoin is not a currency but a collection of 100 million certificates, each of which can convey a digital asset for movement on blockchains updated on thousands of nodes around the world. Smart contracts could be written on the blockchain, companies and governments could be run on this technology, he explained.
“The ramifications are mind-boggling, but we’re in the very early stages,” Kikvadze said. If this were the internet, he continued, “we’re still in the age of dial-up connections.”
Read more posts from the Rakuten FinTech Conference 2017 here.