Will post-Corona bless a new era of digital currency in Japan?
Japan appears to be aiming at leading in both fiat and crypto markets as the supply-side drive is encouraged and geared toward more diversity and cooperation.
The year 2020 stood out in the developments around digital currency in Japan. Not only did Bitcoin reach a record high but also the number of Japanese investors with active cryptocurrency investments hit a record high.
The mass adoption of digital assets in Japan
Bitcoin soared to record highs against the dollar breaking above $20,000 for the first time due to increasing demand from investors taking the crypto assets as a hedge against inflation and a safe-haven currency. The number of active crypto investors in Japan reached a record high of 16.2% this year, while the number decreased slightly in China (Hong Kong) to 14.1%.
It is no longer exclusive to investors trading cryptos in Japan but also non-crypto-savvy people are adapting to the use of cryptocurrencies. “Furusato nozei” is a popular form of home tax contribution in return for bitcoin. Younger adults are using cryptos to support their favorite football leagues as well as playing bitcoin casinos like 22bet.
The fast move to cashless Japan
Historically, cash has been a favorite method of payment in Japan, contrary to the neighboring countries of China and South Korea, where various electronic payment options are much more popular. The recent turning point for Japan’s financial system came with the goal of a cashless Japan by 2025 as announced by the former Prime Minister Abe, which is set to increase the share of cashless payments to 40 percent.
Efforts towards a cashless economy have accelerated this year in Japan amid Covid-19 while observing a number of countries rolling-out pilot experiments with Central Bank Digital Currencies (CBDC). Earlier this autumn, the Bank of Japan announced its testing of digital yen in early 2021. Japanese blockchain firm Soramitsu is working together with the Ministry of Finance, the Financial Services Agency, and the Bank of Japan (BOJ). Soramitsu helped Cambodia’s CBDC named Project Bakong.
Following the BOJ’s announcement, mega banks and e-payment firms teamed up to jointly drive a pilot testing of digital yen issued by private sectors. The group of this initiative consists of more than 30 prominent companies from a range of sectors, including Mitsubishi UFJ Bank, Sumitomo Mitsui Banking Corporation, Mizuho Bank and NTT Group.
Japan as a dual player in digital currencies
The country enforced new regulations concerning cryptocurrency in spring 2020. The Payment Services Act (PSA) and the Financial Instruments and Exchange Act (FIEA) came into effect in introducing additional regulations to ensure user protection, regulate derivatives trading on cryptocurrencies, and establish a more transparent regulatory framework on cryptocurrencies.
While China is taking the lead in the race of sovereign digital currency and promoting a blockchain, it stands in opposition to the decentralized nature of cryptocurrencies. In contrast, Japan appears to be aiming at leading in both fiat and crypto markets as the supply-side drive is encouraged and geared toward more diversity and cooperation.