Forex Giants Trading Bitcoin? In Japan That Might Be Months Away

"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, head of blockchain at Deloitte's Japan subsidiary, Tohmatsu Venture Support, 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, Tohmatsu, 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 'sagicoin'-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:

"As long as it touches fiat, it’s going to get regulated. I think it’s a wonderful thing."

Image by Pete Rizzo for CoinDesk