Digital currency is taking the world by storm. Yet, as with other things this country has adopted — from Star Wars to KitKats — Japan has taken its love of bitcoins and multiplied it until it’s over 9,000. So what exactly is it and how is it being used any differently here?
Created in 2009, Bitcoin is a digital-only, or “crypto,” currency. It has no middleman or central administrative body such as a bank or government with a maximum of 21 million bitcoins that can be created. (Since Bitcoin is both a currency and a protocol, the use of capitalization can be confusing. For this article, we use “Bitcoin” singular and with an upper case “B” when referring to the protocol, software or community; and “bitcoin” with a lower case “b” when talking about it as cash.”
No one quite knows who really created the cryptocurrency. The only information we have is that it was made by someone, something or some people using the fake or real name or pseudonym of Satoshi Nakamoto. Many have claimed (or denied) being the illusive cryptocurrency creator, but as of yet, their true identity remains a secret. I’m not saying it’s me, but no one has seen the alleged Mr. Nakamoto or I in the same room, at the same time. Just sayin’…
It would be somewhat poetic if the creators were Japanese, as two of the biggest cryptocurrency thefts have taken place here in the land of the rising sun. One of those misappropriations was from Mt. Gox — the less successful cousin of Mt. Fuji who won’t stop crashing on your sofa. Mt. Gox was a Tokyo-based bitcoin exchange. In 2014, Mt. Gox reported over 650,000 bitcoins stolen. At today’s rate, those same bitcoins are estimated to be worth close to ¥978 billion (or about US$9.2 billion). Who needs James Bond with stories like this? Yet this failure is part of the reason Bitcoin is so popular in Japan, as it paved the way for some government intervention and regulation which helped establish the online currency.
Japan and bitcoin
Nomura, a financial securities firm, estimated that around one million Japanese people hold around 3.7 million bitcoins. Advertisements on TV and on the train for bitcoin services are all the rage, with celebrities such as television comedian Tetsuro Degawa advertising for Coincheck, a Tokyo-based cryptocurrency exchange (more on them later).
Following the Mt. Gox theft and failure, the Japanese government amended its excitingly named Payment Services Act. If that name didn’t get you going, I don’t know what will. The act, originally designed to regulate and monitor financial transfer services, was altered to allow Bitcoin, and other cryptocurrencies, to be used as “payment of equivalent value for purchased goods or services,” essentially making them a valid form of remittance.
With government backing, it assured many people that, at the very least, these types of currencies (and incumbent risks) were more secure than before. It pushed Bitcoin and other platforms out of the shadows. With low interest rates, investment in bitcoin is seen as a potentially lucrative — albeit highly volatile — opportunity. Its value has surpassed ¥1 million per coin and is predicted to add 0.3 percent to the Japanese GDP.
Nobody else in Asia has such an open market. China and South Korea, both previously large markets, recently took steps to cripple cryptocurrency trading, forcing many investors to flee to Japan. Showing their dedication, Japanese bitcoin enthusiasts did the next logical step: make an idol group. Obviously.
Each member of the band, unsurprisingly named Virtual Currency Girls, represents a different cryptocurrency. Tickets for their first show, when they debuted on Feb. 1 of this year to an audience of about 20 people in Tokyo, could only be purchased with bitcoins. The J-pop group of eight members wear titillating French maid uniforms and Mexican wrestling masks as they perform. Their fans that day coughed up probably wanted to remain anonymous in their purchase of tickets to hear them sing lyrics like: “Be careful about your password! Don’t use the same one!” You should have a quick listen to their first song: “The Moon and Virtual Currencies and Me.”
How can you get into bitcoin — and should you?
In keeping with my nature of fiscal irresponsibility, I decided to buy some Bitcoin.
One of the most popular apps to do this with is Bitflyer. Popular partly because it is supported by the Japanese government, but also because it’s so fun to say out loud.
All I had to do to set up my account was send in a copy of my ID and input some personal information. Depositing money was simple. You can either do it via bank transfer or sort it out through a convenience store. I ended up putting down a modest ¥4,000 (¥3,500 after tax and service fee). My days and nights were filled with me opening the app and pretending I understood the graphs and numbers, watching as they rose and fell — feigning I could make some solid prediction on what would be the next investment.
I was throwing all sorts of random financial terms out in my conversations, trying to bolster my new investment banking lifestyle. “Derivatives” was my favorite. However, my spirits were quickly dampened as I watched the cryptocurrency market take two big hits earlier this month. I watched my profits dwindle and then saw the small amount I had in the app get even smaller. It was a nice reminder. Although jumping in to the investment game (if I could even call what I did, that), may be fun, it’s certainly not a place to make your fortune.
If you’re planning to put a lot of money into cryptocurrencies, know that these transactions fall under “miscellaneous income” and can be subject to a tax rate of around 55 percent.
What is the future of bitcoin?
I’m not an economist. I don’t play one on TV. I’m scared by the idea of decimal points. However, even I can tell that the future of all cryptocurrencies is murky.
In January here in Japan, Coincheck, a cryptocurrency exchange service, reported that around ¥58 billion worth of NEM tokens (a blockchain alternative to Bitcoin) had been stolen from their reserves. For the average person (the kind who will keep cryptocurrencies afloat and give it its legitimacy), stories like this will lessen any future enthusiasm.
Bitcoin is in a speculative bubble. No one is really sure what holds it up. The governor of the Bank of Japan even came out and called the surge of bitcoins “abnormal.” It is mostly Asian markets that support cryptocurrencies and once their love of all things bitcoin comes more in line with how those in the West view the currency — as a small, light investment opportunity — we may see a drop. Traditional currencies are backed by the stability of their respective governments. So, we can bank on using our yen until everything collapses and we’re all running around with wizard hats and swords. Or, what us nerds call Tuesdays.
However, I can’t help but feel there is a chance bitcoin has a happy future.
Banks are cashing in on the craze. Mitsubishi UFG Financial Group (MUFG), one of Japan’s largest financial institutions, has said they will create their own cryptocurrency (“MUFGcoin” sounds too fun to pass-up). It’s set for a launch this fiscal year.
Its value has surpassed ¥1 million per coin and is predicted to add 0.3 percent to the Japanese GDP.
Companies in Japan, such as GMO Internet, the operator of a number of online financial, advertising and infrastructure businesses, has even started to offer employees a chance to take some of their salary in bitcoins. Small business owners are also getting involved. In Tokyo, the restaurant The Pink Cow started accepting bitcoin as payment from early 2013 and even has a bitcoin ATM on the premises. As well, large companies, such as BIC Camera, a large electronics retailer in Japan, allows payments with bitcoin. As a matter of fact, you can see how it works in this video.
If you can’t tell: I’m a big fan of cryptocurrencies.
Beyond what they represent, I enjoy the convenience, its integration of the Internet of Things and a currency for our age. Investing in bitcoin, especially in Japan, is painfully easy, and as more and more retailers and financial institutions move to accept cryptocurrencies it may be tempting to try investing in all these currencies you can.
Yet, the recent trials and tribulation that they have faced (including the recent hacks in Japan and recent scandal of price manipulation from America) are stark reminders of what bitcoin really is: an opportunity for small investment, not something to pour every last yen in.
Despite the attacks, cryptocurrencies like Bitcoin still stand and they look to be here to stay. The freedom they offer and the impact they have on society are slowly ebbing their way into everyday life. However, for bitcoin, the bubble is set to pop and its big fall is a case of when, not if.
Up next on my economic predictions: The Zimbabwean dollar, and why 14,000 percent inflation is the next best thing.
Have you bought into any cryptocurrency? From your experience, what advice do you have for others who may be thinking about getting into them? What do you predict is the future of bitcoin in Japan? Let us know in the comments!