Where is the digital currency paradise? This country accounts for 60% of the world's bitcoin transactions

The global financial crisis of 2007-2008 wreaked havoc on the world economy: consumer assets shrank dramatically, homes were foreclosed on en masse, people were evicted, a large number of businesses went bankrupt, long-term unemployment soared, and the global economy fell into recession. But not everything associated with the crisis was negative. The rude awakening of national economies that were on the verge of collapse due to bad bank decisions and practices allowed new ideas to emerge, gain traction, and be put to use, especially in Japan, the Land of the Rising Sun.

With the credit crisis in full swing, Japan passed its Basic Space Law, which established space solar power (the concept of collecting solar energy in outer space and sending it to Earth via satellite) as a national goal for the Japan Aerospace Exploration Agency. Then in January 2009, Satoshi Nakamoto introduced the world to a new triple-entry accounting system and the world’s first cryptocurrency, Bitcoin.

Nine years after Bitcoin was launched, the impact of the financial crisis on the global economy, society and politics has not completely subsided. Finance departments of various countries are still facing funding shortages, and there is still no easy solution. The subsequent sharp increase in government debt has triggered several sovereign debt crises. The ultra-low interest rate policies adopted by central banks in an attempt to fight deflation have left investors racking their brains to find investment opportunities.

These economic conditions have led to a surge in interest in Bitcoin as an investment alternative, as it has almost zero correlation with other asset classes, making it a perfect diversification option. Japan is currently the largest Bitcoin market, accounting for more than 61% of global trading volume and 2.7% of the world's total Bitcoin holders.

Masayoshi Son, CEO of SoftBank Group, Japan's richest man, is using his vast capital to try to change the way startup tech companies are invested in, trying to disrupt Silicon Valley finance. He calls the technology "disruptive foundational technology that builds the foundation for the future." In 2017, with the support of investors, Son teamed up with tech companies Apple, Qualcomm, Foxconn and Sharp to launch the SoftBank Vision Fund. Because Bitcoin investments are considered halal, investors in the fund also include Saudi Arabia's Public Investment Fund and Abu Dhabi's Mubadala Investment Company. More and more foreign wealth funds are eager to get shares in tech companies and their ICO tokens, and SoftBank is pushing its second SoftBank Vision Fund, which plans to raise about $88 billion.

Son believes that global demand for digital assets will continue to grow as internet connectivity and solar energy utilization increase, so he has invested in low-orbit satellite company OneWeb and solar power companies around the world.

Bitcoin Exchange

Japan has a huge interest in cryptocurrencies. The first Bitcoin exchange, Bitcoin Market, was established in Japan on February 6, 2010, when Bitcoin was trading at $0.30 per unit. However, six months later, the exchange collapsed due to a scam. Japan's Mt. Gox quickly rose to prominence in the same year, but it was hacked and bankrupted four years later. Until the recent theft of $533 million worth of NEM from an unregistered exchange, Coincheck, it was the largest theft ever experienced by a Bitcoin exchange. Coincheck is not the only exchange to be hacked, as the number of cybercrimes related to cryptocurrencies is on the rise, and users and exchanges are struggling to keep up with hackers and continuously develop relevant security measures to fight hackers.

Thus, Saito, a partner at Japanese law firm So-Law, explained: “Japan’s first Bitcoin regulations were introduced after the Mt. Gox hack. The revised Banking Act and Crime Proceeds Transfer Prevention Act prohibited banks and securities firms from providing Bitcoin transactions to clients without registration, but allowed self-trading in Bitcoin. These laws came into effect on April 1, 2017, along with the revised Payment Services Act, which recognized cryptocurrencies as a means of payment, giving them the same legal status as any other currency. To date, the Japanese Financial Services Agency has granted sixteen cryptocurrency exchange licenses.”

After the largest Coincheck hack in history, the Japanese Financial Services Agency stepped up its investigation into Bitcoin exchanges and Bitcoin money laundering, while also promoting the merger of the Japan Blockchain Association and the Japan Cryptocurrency Business Association, and establishing a new unified self-regulatory agency under the revised Payment Services Act to create a regulatory framework applicable to the crypto industry.

This is important because regulations allow SoftBank Investment, Sumitomo Mitsui Banking Corporation, Mizuho Financial Group and Dai-ichi Life Insurance Company to continue investing in bitcoin exchanges to make Japan the world's largest bitcoin trading market, surpassing China and the United States.

ICO

Japan's ICO market is also very hot. Masayoshi Son's brother, Taizo Son, founder and CEO of venture capital firm Mistletoe, predicts that ICOs, which democratize fundraising, will be suitable for startup financing. At present, there is still no law to govern ICOs, but on October 27, 2017, the Financial Services Agency of Japan issued a statement clarifying its position on ICOs: "ICOs may fall within the scope of the Payment Services Act or the Financial Instruments and Exchange Act, depending on their structure."

In February, the Financial Services Agency of Japan warned an unregistered foreign ICO organization that could cause investors to suffer losses. The Ministry of Finance of Japan also warned an investment company and a suspicious ICO.

Cryptocurrency taxation

In July 2017, Japan abolished the 8% cryptocurrency transaction tax, which led to an overall rise in cryptocurrency prices. However, the tax exemption for cryptocurrency transactions was short-lived: on September 6, 2017, the National Tax Agency of Japan announced that gains from cryptocurrencies are subject to personal income tax, classified as "miscellaneous income", except for those related to activities that generate business income, such as mining or active trading. Miners can deduct expenses such as mining facility costs and electricity consumption from their final earnings.

The top federal tax rate for independent taxpayers in Japan in 2017 was higher than the 39.6% in the United States. Unlike the 20% tax rate on stock and foreign exchange income, Japan imposes income taxes ranging from 15% to 45% on investors with annual income exceeding 20,000 yen (176,500 US dollars) and miscellaneous income exceeding 200,000 yen (1,765 US dollars). An additional 10% municipal tax is levied at every income level. In fact, in this tax process, all cryptocurrency users need to use the same meticulous record-keeping and price tracking measures currently implemented in the United States, convert cryptocurrency gains into yen, and then declare them in the annual tax return submitted between February 16 and March 15, 2018.