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Fenbushi Capital: Japan’s Blockchain Industry Report

At present, the attention on blockchain technology is increasing, and it is rapidly popularized in all countries around the world. The total value of Bitcoin is over 100 billion dollars; it grew 5 times to more than 10 million users compared to the beginning of the year. Central banks and financial institutions begin to study digital currencies, and “blockchain+ industry” projects continue to land in various fields, including supply chains, traceability, and remittances etc.

However, because of the difference of economic condition and policy orientation, the development of blockchain industry in various countries is uneven. Japan is the world’s third largest economy, its government and society have a positive attitude towards the development of the blockchain and the digital currency.

Last month, the FSA issued a virtual currency exchange business license, which led to a big increase in Japan’s bitcoin trading volume. Currently, the trading volume of yen to Bitcoin has accounted for more than 60% of the total trading volume of Bitcoin. Japan’s major financial institutions and Internet companies are also actively involved in the blockchain industry whose development momentum is in the ascendant.

So, why does Japan support the blockchain industry? What kind of policies has it gone through? What does the industry ecology look like now? What kind of players are there in the industry? With the mindset of “Another’s good quality or suggestion whereby one can remedy his own defects”, I made analysis and give the conclusion as follows:

1. Why does Japan hold a positive attitude towards blockchain?
Japan in fact has a very deep link with the blockchain, bitcoin founder Satoshi Nakamoto has a Japanese name, the United States Newsweek has rumored that he is a Japanese American.

As for why the Japanese Government strongly supports the blockchain and digital currency industry, Japanese media and various opinion leaders have made a lot of comments and speculations, the author summed it up as follows:

First, the well-known financial columnist Xiao has proposed that bitcoin is held by Japan as a strategic resource. Japan is a country with a lack of resources, and its national mentality lacks the sense of security and needs to continuously obtain the resources to survive. For example, Japan’s oil reserves are the first in the world, reaching 158 days, 20 days longer than the US, 20 times as much as that of China’s. As a means of value maintenance in the internet age, Bitcoin has exceeded the price of $7000, much higher than the unit price of gold and oil. And its potential value in the future of Internet can not be underestimated.

2nd, Japan’s Nikkei news reported that in order to host the 2020 Tokyo Olympic Games, it has the plan of increasing the proportion of its cash-free settlement to 40% within 10 years. One of the purposes is to improve the convenience of consumption to facilitate foreign tourists. At present, convenience stores generally have ATMs to use since Japanese traditionally prefer cash, , the current ratio of cashless payment is less than 20%.

Therefore, Japan has legalized bitcoin payment in the former half of the year. It’s calculated that there are 5000 plus merchants in Japan supporting bitcoin payment with 5 times of increase being expected this year. Bitcoin is gradually accepted as a way of payment in Japan.

3rd, in the author’s opinion, Japan as a rich developed country has a huge investment group serving as a good Bitcoin users foundation. Japan has the world’s largest foreign exchange margin trading market, “Mrs. Watanabe” group represents a key investor in global currency market with hyperactive transactions.

Japan has the world’s largest foreign-exchange trader GMO Click ( it has been granted a virtual currency business license) that has a monthly foreign exchange volume of $1 trillion. As a result, Bitcoin has been welcomed by investors in Japan as a way of investing.

2. Japan’s blockchain/bitcoin policy summary

In February 2014, the Japanese bitcoin exchange Mt Gox was robbed of 850,000 Bitcoin (about $430 million). Japanese lawmakers have taken the failure of the exchange as an important driver of the digital currency industry.

In April 2017, the Government of Japan revised the Fund Settlement Act, acknowledging Bitcoin as a lawful form of payment and set up a series of standards and rules for the exchange.

In July 2017, Japanese government officially terminated the 8% consumption tax that was required while buying Bitcoin from the exchange.

In August 2017, Japan’s Financial services department(FSA) disclosed that about 50 Bitcoin exchanges had filed a registration document with the agency and had set up a panel to oversee digital currency.

In September 2017, Japan’s Financial Services Department (FSA) issued the first list of licensed Japanese “virtual currency exchanges”. The first batch of licensed Japanese virtual currency exchanges included 11 exchanges, including Bitflyer, Zaif, Btcbox, GMO, Quoinex, Bitbank, and Bitpoint, which were the first batch of virtual currency exchanges gaining government approval in the world.

3. Japan’s virtual currency exchange

Today, yen has become the main legal currency for bitcoin pricing. Yen/Bitcoin transactions accounted for 65% of the global trading volume, nearly 3 times that of U.S. dollar which ranks second, followed by the KRW and the euro. Over the counter market has become a choice since China has shut down its domestic bitcoin exchanges.

4. Japan’s bitcoin exchange rank list by trading volume.

It is understood that the Government of Japan mainly conduct compliance review of the Exchanges in the following areas:
Part I: Separate customer accounts. First of all, assets of the trading platform users and the platform itself need to be bookkept and managed separately.

Part II: Anti-money laundering. Each exchange is required to perform strict KYC, users of different countries need to provide information representing their identities. After the end of the routine authentication, the exchange will send a letter to the user verifying the current address of the user’s residence. It’s not until the users receive the letter can they start transaction. The user’s account will be frozen if the letter is not signed by the intended person or returned to the exchange.

Part III: System security management. The FSA needs to evaluate the internal systems of these exchanges to assess their ability to protect their clients ‘ assets and conduct on-site inspections if necessary.

5. Introduction to Japan’s main virtual currency exchanges


Bitflyer is Japan’s largest virtual currency exchange with more than 800,000 active users currently. Its 24-hour trading volume is nearly 400,000 bitcoins.

Since its inception, Bitflyer has raised more than US $35 million, its investors include Mitsubishi UFJ Capital Co., owned by MUFG Financial Group, Inc., Dentsu Digital Holdings, Inc., a VC company owned by electric Qualcomm Group, SMBC, Mizuho Financial Group, and The Dai-ichi Life Insurance Company, Limited and other financial companies. It attracted from SBI 3 billion yen (US $27 million) in the C round.

Currently bitflyer also has other business sectors in addition to the exchange, including remittances, merchants pay, bitFlyer Lightning, bitcoin trading platform designed for professionals and chainflyer blockchain browser etc. Bitflyer has now reached a blockchain solution with Sumitomo Mitsui Banking Corporation and Mizuho Financial Group. Bitflyer has its own blockchain lab and a 50 million yen start-up fund.


Coincheck, founded by Wada Akira and Otsuka Mio, was officially opened in November 2014 and employs more than 70 people. Currently Coincheck has a simplified Chinese version with the daily bitcoin transaction volume reaching about 3-4 billion US dollars, making it Japan’s second largest exchange.

The exchange also launched bitcoin deposit products with a 14-day annual interest rate of 1%, 2% for 30 days and 3% for 90 days respectively. The longest deposit option is a 12-month deadline with the highest annual interest rate of 5%. Such service will be well received by the people because traditional Japanese banks adjusted their interest rates to zero earlier this year.
In support of the blockchain industry, Coincheck came up with $ 500,000 to support start-ups.

6. Mogul comes, competition heats up

After the formal legalization of Japan’s exchanges, the giants began to enter the market. At the same time, traditional companies such as Remix point, Fisco and GMO all launched their own exchanges.

In general, the intense competition among exchanges and the introduction of zero fees and charges may lead to the subsequent competition in derivatives and funds such as futures leverage trading, bitcoin lending, ETF funds and so on.

In the United States, bitcoin derivatives are beginning to make a breakthrough. Recently, CME Chicago Board of the United States plans to launch bitcoin futures, which enhances investors’ expectations of the approval of the Bitcoin ETF.

7. Industrial application of blockchain

In addition to bitcoin, Japan’s blockchain industry has many other industrial applications, such as real estate deposit, identity certification, supply chain finance, clearing and settlement. For example:

1) real estate registration
Japan is embarking on a large-scale project to consolidate the registration of all real estate in towns, farmlands and forests into a single blockchain book. While integrating about 230 million land parcels and 50 million buildings in Japan, the book of accounts will include accompanying details and real estate sales prices.

This registration will be tested in selected cities in 2018. If successful, the Japanese government will put all real estate registrations on the blockchain in the next five years.

2) Identity registration
Japan Financial Services Authority is developing a blockchain-driven platform that will allow Japanese customers to instantly share personal information among multiple banks and financial institutions. According to the Nikkei newspaper, this common identity platform allows bank account holders to register a “shared ID,” for example, to use this ID for opening accounts at different banks.

In essence, this shared ID eliminates the need for users to re-enter personal information when applying for banking services at a new financial institution. The personal information and data held by this Shared ID will be entered, recorded and securely stored on an immutable shared blockchain developed jointly by the FSA and other financial institutions.

3) bank clearing
Japan’s three major banks, Mizuho Financial Group, Sumitomo Mitsui Financial Group and Mitsubishi UFJ Financial Group, started a cooperation through Fujitsu on field testing a cloud-based blockchain platform for sending funds between individuals and developing a smart Mobile APP to improve the usability of this system.

4) Bitcoin insurance
Major exchanges have launched bitcoin insurance since bitcoin stolen incident in Japan gave rise to the birth of Bitcoin insurance market.

Currently bitflyer is working with Sumitomo Mitsui Insurance Co. to launch a bitcoin insurance to protect bitcoin merchants and reduce losses due to technical reasons. Similarly, Coincheck is teaming up with Mitsubishi UFJ Securities on a similar product.

5) Supply chain finance
Mizuho Bank, a subsidiary of Japan Mizuho Financial Group, and IBM Japan jointly develop the blockchain trade finance
platform. Based on blockchain solutions, Mizuho Bank aims to improve the efficiency of the supply chain and trade processes.

6) Consumption payment
Japanese energy company Remixpoint recently launched a new electricity fee collection service for all-Japan customers, which integrates Bitcoin payments. Customers who pay for their electricity in Bitcoin can enjoy discounts. The Bitcoin payments arise wherein will be handled by Bitpoint, the company’s cryptocurrency exchange.

Bitpoint also partnered with Lettuce Airlines to provide Bitcoin payments for its flights and affiliated stores. Bitpoint also works with Evolable Asia to provide bitcoin payment options for more than 1,400 hotels and restaurants across Japan.

7) Blockchain evaluation
The first blockchain assessment service launched by NRI is the review of smart contracts. Supported platforms include Ethereum and hyperledger. supported languages include Solidity, Go and Java.

8) Typical Japanese company’s progress in blockchain business
SBI Holdings

Japan’s Internet finance giant SBI is the world’s most active corporate investor and has so far invested in eight companies including Orb, R3, Ripple, Kraken, Coinplug, Veem, Wirex and Bitflyer. Covering a variety of sectors including exchanges, remittances, bank blockchain alliance and blockchain solutions.

Having in-depth cooperation, SBI and Ripple jointly established a joint venture company: Ripple Asia. Ripple is the founder of the global blockchain payment network and has been integrated into more than 100 financial institutions.

Within Japan, SBI Ripple Asia has established a clearing network for 47 banks (as of the end of February 2017) using Ripple’s technology-based RC Cloud. It allows Japanese banks to collaborate with foreign banks on this cloud platform.

Ripple also has practical examples in the field of remittances. For example, expatriates who reside in Japan can transfer money back to Thailand more quickly based on the cooperation between SBI Remit and Thai Commercial Bank.


GMO is Japan’s Internet giant, quite influential in Internet infrastructure, online advertising media, Internet finance, entertainment and other areas. It has nine listed companies.

In the area of blockchain, GMO announced that it has invested 10 billion yen (about 90 million U.S. dollars) in establishing and operating a mining data center and developing dedicated mining chips. This 7-nanometer chip is expected in the case of the same performance, power consumption dropped to 56%, the test version is expected to be completed in 2018, mass production started in May next year.

GMO has now received a virtual currency exchange license issued by Japan’s FSA.


The Japanese entertainment giant DMM Group, the operator of, a 27 million-user e-commerce site, announced that it will launch a massive cryptocurrency mines. The company plans to become one of the world’s top three mining companies.

Its subsidiary, Securities, is the second-largest foreign exchange company in the world. GMO Click, the foreign exchange company of GMO, is the largest foreign exchange broker in the world.

Users can purchase “DMM Points” in Bitcoin for redemption of content and services provided by, such as videos, e-books, online games, VR tickets, English tutoring services, and more.

9. Blockchain association
There are currently two mainstream blockchain associations in Japan, one is JBA (Japan Blockchain Association), the other is Cryptocurrency Association. The first batch to get the exchange license are mainly members of the latter one.


The Japan Blockchain Association (JBA), founded in 2014, currently has 113 members. With the prevalence of Japanese business circle culture, joining the association is a good way to integrate into the local market.

The association provides consultation on blockchain applications, formulating industry-specific virtual currency exchange and auditing rules, handling trade and government relations, and promoting exchanges and interaction between communities in Japan and overseas.
Member units:

Cryptocurrency Association
Japan’s Cryptocurrency Association was founded in December 2008 with 77 member units as follows:(check pic in the original text)

10. The jade can be refined from stones coming from other hills

Blockchain is inherently a product of a global network whose best way to grow is globalization and community-based operations. Bitcoin and Ethereum Community that has been around for years is the best example. However, at the same time, the operation of community-based operation can not be separated from the rulemaking, support and coordination of governments and industry organizations. Only the combination of the two can make a healthy and stable landing of the technology of blockchain.

As the third largest economy in the world, Japan’s daring to be a bellwether to supervise the blockchain and bitcoin in the world deserves our study and reflection. In the future, the implementation of its government regulation, the formulation of industry rules, the establishment of a product system and the migration of the digital economy all deserve our study and reference.


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