How did Japan become the largest Bitcoin trading country?

Against the backdrop of the Chinese central bank strengthening its regulation of Bitcoin, Japan, which once experienced the Bitcoin "black swan" incident, has successfully replaced China to become the world's largest Bitcoin trading market.

According to Crypto. News, a cryptocurrency information website, global bitcoin trading data shows that on February 12, Japan's daily bitcoin trading volume reached 48.27% of the global trading volume, while China accounted for 21.86%, more than twice the total trading volume of China. Bitcoin usage in Japan has increased significantly. The number of users of the Japanese exchange Coincheck has increased significantly, from 14,000 in April last year to 76,400 in January this year. At the same time, the number of merchants that can accept bitcoin payments is expected to increase fivefold to 20,000 this year.

Previously, China has always been the world's largest market for Bitcoin transactions, accounting for about 90% of the market share. The reason why Japan has replaced China as the world's largest Bitcoin country is not only due to the external factor of China's strict supervision, but also has a lot to do with the active promotion of the Japanese authorities and people.

“Blood lesson”

There is no growth without lessons, and the Japanese Bitcoin market has gone through such a process.

In February 2014, Tokyo-based exchange Mt. Gox, which at its peak handled about 80% of global bitcoin transactions, collapsed after admitting to losing about $500 million worth of bitcoins. Its CEO, Mark Karpelès, was arrested.

The collapse of this large exchange directly hit the morale of the Japanese Bitcoin industry, which remained at a low point until 2016 when the situation changed.

However, it was precisely because of the "Mentougou incident" that the country's regulatory authorities began to consider setting management regulations for Bitcoin.

The pros and cons of Japan's Bitlicense

The entire regulatory framework took more than two years to build. The first version of the bill was submitted to Congress in March last year. In May of the same year, the government revised the Payment Services Act and the Prevention of Transfer of Proceeds of Crime Act. Currently, the draft, which includes regulatory details and guidelines, has been officially passed.

The new law, which will come into effect in April 2017, aims to protect consumers by helping them distinguish between safe (that is, officially approved) and shady exchanges.

The bill also defines several specific cryptocurrencies as legal payment methods to prevent users from falling into the trap of pyramid schemes, fake digital assets and IOU tokens.

This move by the regulatory authorities has also built consumer confidence. Since 2016, the Japanese Bitcoin market has officially emerged from the trough, with a significant increase in Bitcoin users and a significant increase in trading volume.

However, just as the Bitlicense has experienced two extreme views in the United States, Japan's new regulation has both advantages and disadvantages. The Bitlicence launched in New York was previously considered by most members of the Bitcoin community to be extremely bureaucratic in nature, and it also set too high a threshold for small startups, thus endangering the development of Bitcoin startups in the region. Japan has the same intention.

Under the regulations, Bitcoin startups must submit business plans within three years, separate fund management, comply with KYC/AML regulations, undergo external audits, and make regular reports to relevant departments.

Experts estimate that it will cost between $300,000 and $500,000 to set up a compliant exchange. In addition to trading platforms, any company involved in cryptocurrency business must bear additional fees and a large amount of paperwork, so this new regulation will also affect P2P decentralized transactions. Ultimately, this new policy will put tremendous financial pressure on startups, and one day they will be forced to declare bankruptcy.

Even so, supervision is still required for better development, first recognizing the status legally and then modifying the details later.

Bitcoin

In addition to the government's efforts in supervision, Bitcoin traders have also been busy actively expanding the scope of Bitcoin's application.

Bitcoin has more and more practical application scenarios in Japan, which makes Bitcoin not only valuable for investment and speculation, but also valuable for circulation and exchange. The Wall Street Journal reported in January that there are currently 5,270 merchants and websites in Japan that accept Bitcoin as a payment method. The amount of Bitcoin payments in January increased by 8,900% compared to December last year, and the monthly payment amount will continue to maintain a high growth rate.

At the same time, the application scope of Bitcoin is constantly expanding. In addition to its application in various stores and shops, Bitcoin applications have also expanded to public utilities. For example, Bitcoin trader ResuPress has reached a cooperation with Japanese energy companies, allowing users to pay electricity bills with cryptocurrency through ResuPress. It will soon be expanded to water and gas bills, and it is hoped that the number of merchants accepting Bitcoin will increase to 20,000 in 2017.

BitFlyer, Japan’s largest bitcoin exchange, has launched an e-commerce shopping website that accepts bitcoin payments. Sales have increased tenfold in the six months since its launch in April 2016.

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