Japan is one of the most important cryptocurrency markets in the world. Some people estimate that about 50% of the total circulating bitcoins are in wallets located in Japan. In 2017, when Chinese regulators decided to crack down cryptocurrency trading, a good number of exchanges had to decamp and move to foreign countries, including Japan. As a result, China lost its once-the-highest-in-the-world trading volume.
On Sept. 5, 2019, Japan's deputy Prime Minister and Minister of Finance Taro Aso spoke at the FINSUM fintech conference in Tokyo. Aso stated that regulations need to be adapted to keep up with new and emerging technologies and that financial authorities must respond quickly to new developments in order to avoid getting left behind. Aso added, “New approaches are important without relying on conventional frameworks and approaches.” How refreshing and encouraging! One thing we have to keep in mind. Different from the U.S., where institutions play a more active role in adopting cryptocurrencies, in Japan, it is a retail-driven market, where institutions are slow and reluctant in dipping their toes into trading cryptocurrencies.
Japan's neighbor China takes a don't-want-to-deal-with-it attitude towards cryptocurrency. Even so, there are thousands of underground exchanges active in China offering trading services to retail investors. Are regulators aware of the situation? Of course. Promotions and discussions are mostly supported by WeChat, one of China's most popular messaging platforms, which is closely monitored by the government. How long will this continue? Some people from the industry speculate that next year the government may take action to root out all illegal exchanges, causing another exodus of exchanges to Japan, Korea and other foreign countries.
At the same time, China is aggressively pushing the adoption of blockchain technology. Chinese big four banks have reported real application cases of blockchain. For example, China Construction Bank is upgrading its BCTrade, a blockchain based platform offering factoring and forfeiting services that enable exporters to get immediate cash by selling their medium and long-term receivables at a discount price. Launched in April 2018 it has processed more than $50 billion transactions up to date.
ICBC, the largest bank in the world by assets, has also created a blockchain platform of financing to help SMEs with factoring transactions. It has processed over $6.4 billion transactions in the first nine months since its launch last February.
Bank of China facilitated its first cross-border money transfer to South Korea in dollars via its patented blockchain payment system last August.
We should also keep an eye on the Bay Area Trade Finance Blockchain Platform launched last September by China's central bank to help SMEs to finance in the areas between Hong Kong, Macau and Guangdong province in southern China. The Bay Area is modeled after the Bay Area in San Francisco and New York to create a financial and technological development zone by connecting Guangdong Province, Macau and Hong Kong.
Japan and China take different approaches toward blockchain and cryptocurrency. The former encourages its retail investors to invest in cryptocurrency with a clear framework, while the latter is passionate about blockchain technology, at the same time, hostile toward cryptocurrency trading.