Japanese citizens have a wasteful habit: they pay cash. The majority of payments in the third largest economy in the world consist of paper bills and metal coins. This distinguishes Japan from China and South Korea, dominated by all sorts of “cashless” e-payment schemes and from the West, where credit and debit cards are more popular physical counterparts.
As Japan refers to the cryptocurrency
This also means that the country has a lot of ATMs — perhaps more than 200,000 — as well as cash registers and parks vehicles to move money. All this translates into an annual cost of roughly $ 18 billion into the local equivalent, which shall be paid by mainly the financial industry.
Next year hundreds of thousands of foreign visitors — the majority from countries where credit cards and digital payments become second nature — to go to Tokyo for the Olympics. It is expected that they will spend billions of dollars during the event, and Japan’s financial system just can’t handle it. Hundreds of millions of dollars still on the table.
Prime Minister Shinzo Abe says that he wants 40 per cent of payments were cashless by the year 2025. In August, the government announced plans to provide tax breaks and subsidies to companies that support this movement. And though everything from credit cards and ending a transaction with the use of QR codes, can be considered suitable, some of the largest financial players in the country believe that the way to wean Japan from the cash lies in the technology that runs Bitcoin.
Writes the MIT Technology Review, financial group Mitsubishi UFJ (MUFG), the largest Bank in the country and the fifth largest in the world by assets, has teamed up with the American Internet company Akamai to create a network of consumer payments based on blockchain at the time of the Olympics. If they do scheduled, it can be the fastest and most powerful to date, the network of payment to consumers. They argue that during testing, the network was able to process over a million transactions per second, and each transaction is confirmed in less than two seconds, and in the end can be reached 10 million transactions per second. The network of Bitcoin makes about seven transactions per second, and each transaction can “hang out” for an hour to confirm.
The Japanese system is designed for all types of payments, from automatic road tolls to swipe payment cards and in-app purchases.
MUFG, which also experienced its own cryptotoken, not alone in their endeavors. Mizuho Financial Group, a large holding company, a few years experimenting with the technology of the blockchain in the framework of the project named J-Coin, and plans to launch its own digital currency for retail payments in March. SBI Holdings, a large financial service firm, said that building your own token, also for retail payments, called S Coin.
All of these companies are banking on the fact that Japanese society is ready to begin using digital money. They are relatively technologically advanced, cryptocurrency trade flourished in the country for many years, and the financial regulators of Japan are more familiar with the technology of the blockchain, than any other in the world. Under pressure from the government on clearing and minor competition from credit cards and other forms of electronic payments, Japan can jump over the technology underlying today’s networks, electronic payments, and go directly to the blockchains.
If the experiment succeeds, the economy could be transformed. Everything from huge transaction between banks to small retail purchases can be carried out almost instantly and for a small price; even modern credit cards are slow and expensive in comparison.
While Japan will become the world’s largest test stand for a decade of ideas — cryptographic Ledger transactions and network computers, ensuring the safety and authenticity of this book. The country could regain its status as a world leader in Finance and technology — the status that she had lost.
However, the story of how the country has come to this, begins with the disaster.
The Legacy Of Mt. Gox
Long ago in the history of cryptocurrency — that is, somewhere between 2010 and 2014 — Tokyo-based Mt. Gox was a global online platform to buy and trade bitcoins. In 2013, it accounted for 70 percent of all bitcoin transactions. So when hackers took bitcoin to $ 450 million from the stock exchange, leading to its collapse, shock waves went all around the world.
This disaster particularly hurt Japan, says Aya Miyaguchi, at that time working at Kraken, the American stock exchange, which was one of the few competitors Mt. Gox. “For the most part, people knew nothing about bitcoins,” she says. When the news of the crash, many people panicked, and the Japanese media descended on the cryptocurrency.
It upset Miyaguchi, a radical Japanese who moved to USA 10 years ago and now heads the Ethereum Foundation. “I thought that the whole ecosystem may be in danger without proper awareness and education,” she says. She felt it her duty to help to inform regulators, investors and the General public about cryptocurrency and blockchains.
Just a month after the fall of Mt. Gox, Miyaguchi met Muneyuki Fukuda, an influential legislator in the ruling party of Japan, which is entrusted with was figuring out how to regulate this technology. She was amazed at his foresight. “He saw this technology as a potential competitive advantage for Japan,” says Miyaguchi. “We even talked about how can we use the crypt for the Olympics in Tokyo in 2020.”
Fukuda did not act thoughtlessly. In the late 1990s — early 2000s, technological industry in Japan, once the envy of the whole world, have lost a significant share of the world market, gave it to foreign companies, especially in South Korea and China. The government was looking for new industries where the country could compete. Politicians were particularly concerned, as Japan has lagged behind China in vintage, says Thomas Glucksmann, a former employee of Mt. Gox, which currently manages the Asian corporate partners in Diginex, a Hong Kong consulting firm specializing in technology of the blockchain.
Fukuda decided not to cut the cryptocurrency industry after the fall of Mt. Gox, but to grow it. Instead of immediately creating new rules for the technology of the blockchain, the government has established a self-regulatory organization under the leadership of the industry. Ultimately, Japan has launched the world’s first (and only) mode of licensing of cryptocurrency exchanges, which entered into force in April 2017.
Authorities were less forgiving when hackers in January 2018 stole half a billion dollars of Coincheck, an unlicensed stock exchange, acting willfully. Japanese financial services Agency (FSA) launched an investigation of cryptocurrency exchanges in the country and ordered several of them to correct unreliable security methods. Regulators have tightened licensing, suspending the issuance of new permits; Coincheck, under the new management finally got my license just this month.
Regulation of cryptocurrencies without obstacles for innovation is a challenge for many governments. But Japan seem to have found a pretty good balance. After the incident with Coincheck, FSA “very carefully studied the cryptocurrency and cyber security” and was better informed than most consultants in the industry, said Oki Matsumoto, Chairman and managing Director of Monex, the new owner of Coincheck. As with the Mt. Gox, the Japanese government turned hacking Coincheck a reason to learn.
The invention of cryptanalyst
There is at least one reason to believe that the cash on the blockchain can succeed in Japan: local retail investors have loved the crypt.
Obviously, this love connected with their devotion to trade foreign currencies. Japanese traders account for more than half of the world margin trading in the foreign exchange market. In recent years they have expanded to cryptocurrency trading, taking advantage of the bustling (and now-regulated) exchanges the scene in Japan. It is difficult to determine the exact size of the Japanese market of cryptocurrencies, but it has become the largest market in Asia since China restricted bidding in 2017. Deutsche Bank analysts say that Japanese retail investors were the main reason that the price of Bitcoin at the end of 2017 rose to almost $ 20,000.
Of course, cryptocurrency trade is popular in many countries, but it is almost never used in retail payments. Why Japan would be different? Its retail segment is clearly low-tech: most shops do not accept credit or debit cards. To shop online, people will often print the barcode at home and carry it to the store where you pay cash.
On the other hand, the Japanese are not against electronic payments. Popular prepaid cards like Suica, which sold the largest railway companies in the country. Grocery stores usually accept cards Suica too. Andy champagne, Akamai’s technical Director, is convinced that Japan is all set to part with cash. “This is an extremely technically aware society interested in effecting transactions in digital format,” he says. Given the government’s desire to move quickly to a clearing, “this is a unique opportunity in a unique time.”
But even if so, why a blockchain? Modern crypto-currencies are not particularly stable, if not backed by paper money in a Bank account. They are difficult to use and to protect from hackers and transaction on the blockchain, committed by fraud, cannot be undone. Third-party services such as exchange may have a big problem with security, as shown by the hacked Mt. Gox and Coincheck. And the most popular blackany are slow and require a lot of computing power to protect the registry, which adversely affects the carbon emissions.
System that build Japanese banks, unable to change it. Blockchain MUFG will work on Akamai servers. The company has experience in the creation of proprietary algorithms for delivering web content to users around the world, it is its core business. This experience is easy to use to run the network, which is more energy efficient, faster and cheaper on the public blockchain. Moreover, MUFG believes that even payments that are too small for a credit card are feasible.
Whether the Japanese are spending money on the blockchain? The Kawaguchi has Beaten HashHub co-founder, co-working space for startups on the blockchain in Tokyo, is skeptical. The popularity of the Suica card has shown that nothing is impossible. But she thinks we are talking about utility, not technology underlying. The Suica card is useful, so people accepted them. If MUFG and Akamai are so confident that the use of blockchain technology can significantly reduce costs, as using the subway maps, it can happen.
Subscribe to our channel in the Telegram. Go to cryptanalyse.