What are the applications of blockchain in Japan?

Japan is the world's third largest economy, and its government and society have a positive attitude towards the development of blockchain and Crypto. Because the originator of blockchain, Satoshi Nakamoto, is believed to be from Japan or a Japanese-American, Japanese society generally has a friendly and even supportive attitude towards blockchain.

In terms of policy, Japan has passed the Payment Services Act (PSA) to recognize Crypto as legal property, while treating the transaction income generated by Crypto as miscellaneous income and taxing investors accordingly. It can be said that the policy level has recognized the status of Crypto and guaranteed the development of Crypto in Japan.

Blockchain will continue to develop in 2021 and be applied in many fields. In this regard, Japan is at the forefront of the world in blockchain applications. Japan's blockchain applications include real estate registration, identity registration, interbank clearing, Bitcoin insurance, supply chain finance and consumer payments.

Real estate sector

Previously, the Japanese government planned to develop a large-scale project to register all real estate in towns, farmland and forest areas into a single blockchain ledger. The Japanese government will include approximately 230 million plots of land and 50 million buildings registered in Japan into the blockchain ledger, which will also include detailed information attached to these properties (such as details of collateral) and detailed prices of real estate sales. This move will greatly promote the application of blockchain at the government level.

According to the Japanese government's previous disclosure, the test will be carried out in selected cities in 2018. If the test is successful, the Japanese government will put all real estate registrations on the blockchain in the next five years. The current progress is still in the testing and evaluation stage.

The Japanese government seeks to merge all data from the government real estate database into a visual data record to solve the Japanese government's previous inconsistent and scattered data management. In Japan, local governments, judicial and land management departments each maintain their own property registration, which leads to problems such as irregular and inconsistent data. Blockchain can solve the above problems.

Traditional paper-based registration cannot be updated in a timely manner to reflect people's ownership of real estate. A previous survey by the Japanese Ministry of Justice showed that 6.6% of urban landowner records and 26.6% of land registration records in small and medium-sized cities and mountainous areas have not changed in nearly 50 years. The blockchain platform can also achieve cross-reference of data. For example, if part of the property is arable land, the user will be recorded in the arable land registration, and combined with local data, it is easier to understand who is responsible for vacant land or buildings.

The integration of Japanese real estate data can improve the efficiency of real estate transactions, help sell more and more vacant properties in Japan, and help the government accurately redevelop vacant land.

In 2019, Japanese real estate companies Sekisui House, KDDI Corp and Hitachi said they were piloting an information-sharing blockchain platform for real estate leasing. Telecommunications company KDDI provides identity verification services, while Hitachi uses a platform built on Ethereum.

Sekisui House sub-brand Shamaison, which owns a large number of managed rental apartments, began a pilot program in March 2021, launching an application that allows tenants to view, submit rental applications, and navigate the contract process (based on blockchain). The pilot program was originally announced in June 2020 and aims to create a one-stop software for customers to make tenants' leasing work faster and more efficient. Sekisui House explained in its 2021 Sustainability Report: When sharing data such as transaction history between multiple computers connected to the Internet, blockchain technology is ideal for ensuring information security between multiple businesses.

In April 2020, the NEXCHAIN ​​Alliance was officially established in Japan with 18 members, including Kansai Electric, Tokyo Gas, Mitsui Sumitomo Insurance and Tokio Marine Insurance. The purpose of the NEXCHAIN ​​Alliance is to enable secure data sharing between companies and create new services, not just related to real estate.

Identity Authentication

In 2017, Japan’s Financial Services Agency (FSA) developed a blockchain-powered platform that will enable Japanese customers to share their personal information between multiple banks and financial institutions. The platform allows bank account holders to register for a shared ID, which can then be used to open accounts between different banks.

This shared ID saves the need to re-fill in personal information when opening a new bank account. The personal information and data saved by this shared ID will be entered, recorded and securely stored on a shared blockchain jointly developed by the FSA and other financial institutions.

In addition, on February 26, 2019, SoftBank Group, a well-known Japanese investment company, announced that it would jointly launch a blockchain-based identity identification and verification project with TBCASoft, a US blockchain startup. The project plans to use zero-knowledge proof and distributed ledger technology to protect personal identity information from theft.

In response, Takeshi Fukuizumi, vice president of SoftBank, said that individuals should create encrypted digital identities instead of using and storing multiple usernames and passwords with varying levels of privacy protection. The working group is supported by the Telecom Carrier Blockchain Consortium (CBSG) launched by TBCASoft. In addition to TBCASoft and SoftBank mentioned in the article, the founding members of the consortium also include US telecommunications company Sprint and Taiwan's Far EasTone Telecommunications.

Interbank Clearing

In January 2018, Fujitsu announced that it would work with Mizuho Financial Group, Sumitomo Mitsui Financial Group (SMFG), and Mitsubishi UFJ Financial Group (MUFG) to develop a peer-to-peer remittance service using blockchain. Fujitsu developed a cloud-based blockchain platform that the three banks can use together to transfer funds between individuals, as well as a smartphone application that allows users to process the different steps of remittances, deposits, and transfers including withdrawals.

Previously, Fujitsu and Mizuho Financial Group, Sumitomo Mitsui Financial Group, and Mitsubishi UFJ Financial Group verified whether the system can link personal transfer accounts established on the platform with users' actual bank accounts. They also further confirmed whether the new platform can accurately and securely handle a series of processes, including transferring value between personal transfer accounts and clearing and settlement. They issued a statement saying that the trial was very successful.

Bitcoin Insurance

Previously, 01 Blockchain compiled some hacked data of Crypto exchanges, including Japanese exchanges. Due to the frequent thefts, major exchanges have launched Bitcoin insurance.

Tokyo-based Mitsui Sumitomo Insurance and bitflyer (a Japanese crypto exchange) have launched a new product that will allow Japanese bitcoin exchanges and their customers to insure their bitcoin assets. In addition, Coincheck is working with Tokio Marine & Nichido Fire Insurance to launch a similar product.

According to the Nikkei report, the insurance product of Mitsui Sumitomo Insurance and bitflyer will provide compensation services for losses caused by breach of contract or hacker attacks, with a coverage ranging from 10 million yen to 1 billion yen (about 550,000 to 55 million yuan). What is at the forefront is that the insurance product also covers losses caused by internal company accidents and improper operation of employees. In addition, the insurance company will also pay for the subsequent expenses of the accident, such as customer communication and litigation losses. For example, the now bankrupt Mt.Gox (which was hacked in 2015 and lost 850,000 bitcoins) has now received lawsuits from Canada and the United States.

Table 1 Time of past Crypto exchange hacks, amount of losses, etc.

Data source: 01 Blockchain

Supply Chain Finance

In April 2017, Mizuho Bank, a subsidiary of Mizuho Financial Group, Japan's second largest financial institution, and IBM Japan announced the joint development of a blockchain trade finance platform. The platform is based on blockchain solutions and aims to improve the efficiency of supply chains and trade processes. The platform aims to achieve fast and secure exchange of digital transaction documents and supply chain transaction data; the immutability of blockchain improves the transparency and credibility of all parties involved in the transaction.

The institutions involved in the platform include exporters, importers, shipping companies, insurance companies, port operators and port authorities. The above institutions will share timely and effective shipping transaction data on the platform, which will make the overall message exchange more efficient.

Masao Sanbe, manager of IBM Japan sales, said the Mizuho Financial Group and Mizuho Bank project marks an important step in the actual operation of blockchain in financial trade. IBM Japan has seen the ability of blockchain to optimize trade finance services by working with global trade networks to digitize documents and processes.

Consumer Payment

In October 2017, Japanese energy company Remixpoint launched a new electricity bill service to customers across Japan, which includes Bitcoin payments. In the system, customers who pay their electricity bills with Bitcoin can enjoy a discount (about 3%). Bitcoin payments are mainly processed by the company's Crypto exchange Bitpoint.

BITPoint is a licensed Crypto exchange located in Tokyo, Japan. BITPoint has branches in Hong Kong, South Korea, Taiwan, Malaysia and Panama.

In addition to electricity bill payment services, Bitpoint has also partnered with airline Peach Aviation to provide Bitcoin payment services for its flights and affiliated stores. Bitpoint also works with Evolable Asia to provide Bitcoin payment options for more than 1,400 hotels and restaurants across Japan.

In this regard, Remixpoint said that their target customers are enterprises and retailers. Usually, low-power customers in the retail electricity market have lower electricity bills than high-power customers, so the cost savings through the new service are also relatively small. The company has opened an account with Bitpoint to facilitate customers to pay with Bitcoin and save costs. We will promote Crypto settlement in Japan by developing payment services. Such payment services can reduce remittance and settlement costs, which is also the original value of Crypto.