How Popular Is Crypto Use In Japan?

Japan is slowly transforming into the worldwide center of the crypto sector thanks to its early adoption of crypto technologies and its tech-savvy population. Japan has weathered the past industry’s challenges through trial and error while revising its policies to protect investors and the economy. Early adoption ensured that Japan had a well-established regulatory regime prior to the 2017 boom, which saw the emergence of unregulated markets in other countries. Today, the Japanese can rely on cryptocurrency in various ways, from investment to online casino gaming. This article examines the success elements that are driving cryptocurrency adoption in Japan.

Japan’s Crypto Industry Regulation

Japan’s success in the cryptocurrency market came at a cost. Mt. Gox, a crypto business that held over 70% of global bitcoins, was hacked in 2014, and thousands of currencies were stolen. In reaction to the incident, Japan created the first cryptocurrency regulatory framework, and the Japan Virtual and Crypto-assets Exchange Association (JCVEA) was established in 2018. Legal reforms in 2019 and 2022 also required crypto exchange operators to register with the FSA and follow certain restrictions. The Financial Services Agency (FSA), Japan’s investment and banking regulator, oversees the legality and standards of cryptocurrency.

Adoption of Crypto Payments

In 2016, although cryptocurrencies were not recognized as legal tender in Japan, they were formally acknowledged as a payment method. According to Statista, over 100,000 merchants accepted cryptocurrency payments in 2022.

High Crypto Trading Volumes

With a functional legal structure, the number of crypto investors in Japan has increased year on year. Over three million active crypto asset accounts were registered on Japan’s crypto exchange as of 2021, with the bulk of account owners in their 30s, followed by those in their 40s. Japan reached around 28.5 billion yen in spot trading volume and approximately 37.2 trillion yen in margin trading on the cryptocurrency exchange in fiscal year 2021. According to Statista, crypto assets worth 65.7 trillion Japanese yen were traded in Japan in fiscal year 2021.

Easing Regulations

Tight laws governing the launch of new cryptocurrencies have been a stumbling block for Japanese crypto businesses competing against overseas peers, limiting their ability to offer coin variations. As a relief, JVCEA provided a list of cryptocurrencies in 2022 that trading platforms can list without going through the vetting process.

JVCEA is also advocating for a 10-fold leverage on margin trading on big coins like bitcoins in order to increase market liquidity and attract traders. Trading volumes would reach $500 billion per year in 2020 and 2021, when leverage of up to 25 times the principle capital was permitted. However, trading volumes plummeted as their leverage was restricted to just double the principle capital in 2022.

The Rising Popularity of Crypto Gaming

The acceptance of cryptocurrencies as a means of payment in Japan has substantially enhanced crypto gaming. Enin coin, in collaboration with Hashport, is the first crypto coin approved for gaming. Because of the favorable environment, mobile crypto gaming is gaining traction in Japan, with numerous companies rising to cover the supply gap. Konami, Bandai, and Capcom are among the video game firms who have entered the cryptocurrency business. Online gaming companies are marketing themselves easily since crypto payments provide more benefits to their consumer base. Apart from anonymity, crypto payments are more secure and reduce the possibility of fraud by registering transactions on a public ledger. Crypto gamblers can also wager without creating an account.

Final Word

Although Japan is a leader in consumer protection and crypto market regulation, recent amendments are restricting crypto exchange operators. Margin trading has become less profitable as maximum allowable leverage has been capped. However, prominent industry actors are lobbying for changes to help crypto investors. Despite losses, Japan, unlike many other countries, did not prohibit crypto payments. Rather, it adapted to the market’s regulatory challenges.