"It's going to be a big game changer. It's
made way for all these big institutions."
Makoto Takemiya doesn't have to go far to find
someone who agrees that Japan's financial giants will soon start to push
startups out of the country’s cryptocurrency market. In fact, the CEO of
blockchain identity startup Soramitsu is sitting across from Mike Kayamori, the
CEO of bitcoin exchange Quoine, who is already shifting his company from the
consumer market for this reason.
Go Takahashi, HAW International's director, and
Hitoshi Kakizawa, Deloitte Japan's head of blockchain, agree, asserting that
when new legislation becomes law later this year, Japan's blockchain market
will see a radical change.
In spite of their varied business models and
approaches to the technology, the four delegates, in New York as part of a
government-sponsored innovation exchange program, find rare agreement on the
issue.
Takemiya, himself a member of the Hyperledger
blockchain consortium, believes that "big financial institutions" are
lining up to add a new asset class to their existing product offers.
He told CoinDesk:
"You’re going to have huge financial
institutions competing with shitcoin exchanges."
Kayamori, whose exchange raised $16m in a
funding round last year, doesn’t agree with the choice of words, but he's just
as certain this transition will begin to take place in April. That's when a law
passed in Japan last May – which will require exchanges to register with the
country’s Financial Services Agency (FSA) – will go into force, and digital
currencies will become regulated.
When that happens, according to Kayamori, major
foreign exchange (FX) players including GMO Internet, SBI Holdings, Monex and
Hirose Financial will all seek to launch services that help boost customer
activity via new product offerings.
Some, like GMO and SBI, are already positioning
publicly for the move.
"They're going to put bitcoin, ethereum and
ripple, they just haven’t decided who they are going to outsource to, or who
their liquidity partners will be," he said.
Others at the table all agree that, despite the
increasing focus on enterprise blockchain and distributed ledger applications,
movement on cryptocurrency will be a beachhead in Japan.
"They want to get the new business,"
Kakizawa said. "They want more currency."
Market diversity
Yet despite this agreement (and the common
ground of being notable players in a small industry), the startups selected for
the exchange program have varied approaches to blockchain tech.
Kayamori, for instance, was there to meet
exchanges including Paxos’s itBit and the Winklevoss-backed Gemini exchange,
along with market makers and hedge funds. Yet others had newer business models.
On the other end of the spectrum, Takahashi
noted that HAW International (itself an 18-year-old IT services firm) is
looking to conduct proofs-of-concept projects with financial institutions,
encouraging them to explore how traditional assets could trade on public blockchains.
"These take three days of settlement, but
on the blockchain this kind of program takes 10 minutes," he said.
Interestingly, Takahashi favors the bitcoin
blockchain for his work with institutions, praising its simple scripting
language as an asset, even as interest migrates to platforms like ethereum. (A
concept that was greeted with skepticism by other attendees, some meeting for
the first time).
By contrast, Deloitte, Kakizawa said, was there
to observe and learn, so that it can keep tabs on the growing market as a
value-add for its service offerings.
The delegation itself is part of a 55-strong
startup group, of which 13 were sent to New York. All are there to meet
business contacts and better understand how their products might fit into the
world market.
Leaving the Wild West
Yet, while the changes ahead are expected to
create new pressures, all agreed that they will improve Japan’s cryptocurrency
market.
Kakizawa, for instance, excitedly draws his
cellphone at one point to show how his news feed has been bombarded with
'sogicoin'-related content – that's Japanese slang for ‘shitcoins’, or
cryptocurrencies that don’t have a unique or valuable market proposition.
Takemiya agrees with the sentiment, throwing in
a personal example of why he believes the local market needs to be reined in
order to protect consumers.
"Near my house there’s a shared cafe where
we can go and work, and a person next to me was trying to sell this old women
on something called 'securecoin'. And he’s talking about how the Japanese yen
is doomed and has all this government debt," he said.
"Which makes sense," Kayamori added in
jest, though he said the enterprise market isn’t likely to be the Wild West
consumers see currently.
"That’s going to change, after these
financial companies come in," he continued.
Yet, there are signs this transition may be
plagued by familiar roadblocks.
Toward the end of the meeting, Kayamori
encourages Takemiya to apply his blockchain-based know-your-customer platform
to the market, but he's not sure it’s the right move.
"We don’t want to be so associated with
cryptocurrency," Takemiya said.
Kayamori isn’t easily swayed, concluding:
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