By Michael Ou, CEO of CoolBitX
Why doesn’t the cryptocurrency industry talk more about Japan? The more I think about it, the more difficult I find it to understand crypto — the computer-originating digital currency designed to bypass borders and governments — without considering Japan’s role in its propagation and popularization.
Blockchain is a technology of the future, and as William Gibson, the novelist who coined the term “cyberspace,” wrote nearly two decades ago, the Japanese “[have] been living in the future for such a very long time now.” And while the future may not look quite the way Gibson once imagined it would, to many observers, it seems that Japan lives months or years ahead of the rest of the world.
Perhaps that’s why the world’s media hasn’t quite caught up yet.
Although shops around the world now accept cryptocurrency, crypto datelines too often originate from places like Switzerland, Malta, and the Bahamas: old-time tax havens possessing more banks than they do regulations. Japan is an economic superpower, not just a convenient deposit for funds, and its progress in regulation and recognition of cryptocurrency, specifically bitcoin, is among the world’s most impressive.
This regulation is perhaps more urgent in Japan than it is anywhere else in the world: while trading volume has declined around the world, as recently as September 2017, Japan was the world’s largest market for bitcoin. In April 2017, the Japanese government made it clear that it understood and appreciated this vital fact: The Payment Services Act recognizes Bitcoin and other digital currencies as legal tender.
Though cryptocurrency is a borderless technology, it’s natural that some cities and countries become centers of tech adoption and development. The American and European centers for the technology are generally recognized, but there’s not yet an obvious frontrunner in the Asia-Pacific region. There’s a substantial South Korean crypto community, but they’re not thriving as they once were; confusing regulation has challenged the country’s many investors.
China is a political and economic superpower, and there are many established cryptocurrency companies there, including dozens of “mining” companies that run the computers that generate new supplies of bitcoin, but, as in South Korea, there are regulatory challenges. The “Initial Coin Offerings” that firms use to fundraise have been banned, and the Communist Party of China may not favor some of bitcoin’s more radical transnational opportunities.
Singapore has a growing cryptocurrency scene, but lacks Japan’s international clout: The city-state has fewer than six million residents; Tokyo alone has over nine million. With its history of technological innovation, its first-rate infrastructure, computer- and mobile-friendly population, and vital place in preexisting world markets, Japan has the potential to become cryptocurrencies’ regional home.
An old adage holds that death and taxes are life’s only certainties. Too often the taxes portion of that equation remains uncertain for crypto investors. No one is quite sure what laws apply, when taxes must be paid, whether cryptocurrency is an asset or an investment or a security or something as yet unnamed. In the United States, for example, states like Ohio and New York have made statements, while others have left taxpayers in the dark.
Japan, by contrast, has issued much-needed guidance: In December 2017, the National Tax Agency ruled that gains on cryptocurrencies should be categorized as ‘miscellaneous income’ and investors taxed at rates of 15%-55%. While no one enjoys paying taxes, Japan’s regulatory progress means that investors no longer have to worry they’re vulnerable to tax penalties.
While news of government intervention makes headlines, private companies in Japan are also working hard to improve the crypto market: here are more than a dozen Japanese cryptocurrency exchanges. With a growing number of Japanese businesses accepting cryptocurrencies as payment, and with many startups in Japan’s thriving tech scene, it’s fair to guess that continued investment will inspire continued innovation.
At times, it’s difficult to remember that the cryptocurrency industry, though worth hundreds of billions of dollars, remains young. Revolutions and upheavals that might occur in decades in traditional finance are accomplished in weeks in the cryptocurrency sector, so predicting the sector’s future can seem nearly impossible.
Yet if there’s any country that has the potential to become a leader in the years to come, it’s Japan. The country’s information economy, proactive legislators, and business-friendly environment have all set the stage for future success. Japan is one of the world’s great crypto-forward markets; we should pay it serious attention.
Michael Ou is the CEO of CoolBitX, an Asian-based blockchain security company