In a report from the Financial Services Agency (FSA) last week, the number of inquiries about cryptocurrencies received by the Japanese financial regulator during the period of Q4 of 2018 had declined. Could Japan citizens be losing interest in crypto?
According to the report published on 8 February, in Q3, the FSA had received as many as 1231 inquiries related to cryptocurrencies from citizens, but this figure had dropped to 788, a 36% drop in Q4. Overall, the year 2018 saw a drop from 3,559 during Q1 to 788 in Q4 of the same year – an approximate 78% drop. Further signs may indicate a further decline may be on the horizon.
The year 2018 arguably was an active year in crypto for Japan, with the year end swamping the regulator with exchange applications after the FSA had granted the Japan Virtual Currency Exchange Association (JVCEA) the power to oversee self-regulation within the industry.
Strides had included a regulatory framework for ICOs, systems designed to monitor tax reporting and evasion, the appointment of a pro-crypto minister who would oversee all things crypto and blockchain which provided a positive outlook for crypto enthusiasts in the region. There were talks about a Japan instituted Bitcoin exchange-traded funds – although this was later dismissed by the FSA as rumors.
Although, unlike some other nations, Japan has had a more differing opinion about state-issued central bank digital currencies (CBDC), saying that they are unlikely to improve the existing monetary systems and therefore, the Bank of Japan itself had no plan to issue digital currencies.
Regardless, Japan is considered to be one of the progressively active countries in terms of crypto regulatory initiatives on the Asian continent. However, one baffling question that remains unanswered is why the inquiries about crypto-related issued had declined over the course of 2018. Are Japanese crypto holders and enthusiasts getting tired of crypto, or are they better off without the oversight of the regulator?
At the start of the year 2018, inquiries were higher even with Bitcoin price declining from its all-time high of December 2017, compared to when the price almost seemed to bottom out at the end of the year. Although, Bitcoin trade volume data from peer-to-peer trading platform LocalBitcoins.com as revealed by Coin Dance had peaked in one of the weeks in October 2018, reaching its highest point for the year and then slowly declined.
Perhaps the drop in inquiries may have had something to do with the security challenges plaguing the Asian crypto market which accounted for a sizeable share in the USD 1.7 billion worth of cryptos reportedly stolen in 2018. This included exchange hacks, exit scams, Ponzi schemes, and identity thefts.
One thing is certain, the government of Japan is striving for a more harmonized environment for both crypto ventures and investors, and most certainly not at the detriment of the financial system and its policies. It has also provided a regulatory sandbox for a more controlled environment for fintech products.
A beneficiary of the sandbox project is a recently approved trial for a yen-backed stablecoin settlement to be undertaken by Digital Garage. With the bottleneck-like regulatory framework designed to protect investors interest, even US-based crypto exchange Coinbase applauds the regulator’s effort for setting up such a system in place.
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