by Jamie Holmes
Japan will aim to provide greater protection for investors interested in Bitcoin as it prepares for a legal framework to regulate digital currencies. A draft bill from within Japan’s Financial System Council will be submitted, and the group plans to hold further discussions as well as to provide a full report. The draft bill contains several proposals; registration with the Financial Services Agency (FSA) for all crypto-currency exchanges, as well as auditing, minimum capital requirements and identity verification of customers. The FSA’s role would then be to inspect exchanges, shut down non-compliant operations and correct faults by issuing orders.
Potential Japanese investors have been cautious with regards to Bitcoin for two reasons. Firstly, the disappearance of almost half a billion dollars from Mt. Gox, which highlighted the need for active regulation in the crypto-space, led to a breakdown in trust and generated negative sentiment towards Bitcoin in the country. Mt. Gox’s CEO, Mark Karpeles, was arrested and charged with embezzlement in September 2015 for his role in the scandal. Secondly, the legality of Bitcoin is a grey area. But this could change following Japan’s Diet meeting commencing on January 4th and the formation of a legal framework.
The push to regulate digital currencies could be attributed to interest shown by the big industry players in Japan; Sumitomo Mitsui Financial Group has expressed its desire to invest in financial technology ventures, setting up an IT innovation department back in October. The bank’s president said that a fintech platform could eliminate the need for branches as retail customers would make virtual payments. Fujitsu and Mitsubishi UFJ Financial Group are two other notable Japanese companies that are contributing to a cross-industry effort to bring the Blockchain mainstream.
Currently, a Japanese bank cannot own more than 5% of a venture outside of the financial sector or 15% in the case of bank holding companies, limiting their ability to invest in the fintech sector. Faced with declining profits and rising costs, banks are trying to expand into this market to provide themselves with a new lease on life. However, they do not want to make significant investments until the current rules are relaxed. Allowing banks’ holding companies to own information technology subsidiaries will aid Japan with fintech adoption, an area which has been lagging behind.
It also seems that the recent price bounce from $400, as well as the regulatory announcement and interest from industrial giants such as Mitsubishi, has tempted more Japanese buyers into the market. In the past 24 hours over 16,000 Bitcoin have been traded in Japan overtaking trading volumes in the Euro which was the third largest currency market. Bitcoin trading volumes are dominated by China, followed by the US. With Japan overtaking Europe in terms of trading volumes, it suggests that the Japanese have shrugged off negative sentiment associated with the Mt. Gox collapse. Also, considering a legal framework and endorsement from big Japanese companies, positive sentiment is growing strong.