Author name: @nobumei (https://twitter.com/nobu_mei)
<aside> 💡 This page describes the factors that hinder innovation in Japan.
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In the previous sections, we have discussed the issues of Web 3.0. Web 3.0 is an irreversible trend demanded by both internal and external pressures. The world is moving toward Web 3.0, but it is clear that Japan will be left behind in this trend. This section deals with Japan's structural issues in the Web 3.0 trend.
There was a time before the blockchain industry rebranded to Web 3.0 when Japan was known as "Crypto Heaven".
MT.GOX, the original "GOXing" company, was also based in Japan, and at the time of 2014, the majority of BTC transactions worldwide were concluded in Japan. At the time, there was no KYC verification or regulation, no guards, so when GOX collapsed, 11.5 billion yen worth of BTC that users had deposited with the company was damaged.
This was a time when Bitcoin was still not well known. There was even a possibility that the Japanese government would ban all services related to BTC and blockchain technology in general due to the scale of damage caused by the GOX incident. Also, Bitcoin is a technology that goes head to head with the government system. It could have easily been crushed once it was given the opportunity to do so.
However, this is not the case at this time. This is because of the bitcoiners of the time who were eager to lobby behind the scenes. It was around this time that the Japan Blockchain Association (JBA) was formed, a self-regulatory organization whose purpose was to "prevent a recurrence of GOX." One company lobbying the government is not very effective, but by setting their own rules before the government acts and having the JBA negotiate with the government on behalf of the industry, they can have some bargaining power.
As a result, despite the GOX incident, the Japanese government did not happen to establish regulations restricting Bitcoin and other blockchain technologies, and Japan only passed the revised Funds Settlement Law (the so-called Virtual Currency Law) in 2016. The author was a student and playing around at the time of the incident, so this is hearsay, but top-class blockchain-related entrepreneurs from around the world visited the Japanese market, and the major foreign media wrote that "Japan is Crypto Heaven".
Not only cryptocurrencies, but NFTs are no different. Around the end of 2017, a dApps game using NFTs was created in Japan by doublejump.tokyo, the No. 1 game in the world at the time. If things had continued as they were, Japan could have been at the forefront of Web 3.0.
However, Japan's future was doomed by the Coincheck 58 billion yen outflow and the Zaif 7 billion yen outflow, which put an end to the cryptocurrency bubble in 2018. Zaif had repeated trading system failures and three business improvement orders from the Financial Services Agency(FSA), and after seriously pissing off the FSA, the representative at the time decided to make a fine play by transferring the company's business and jumping oversesa.
Even if there is a self-regulatory organization, frequent incidents of such leaks will force the FSA to act to protect users. As a result, cryptocurrency trading in Japan will be severely restricted.
The chart below shows the market capitalization ranking of crypto assets. Only four of these cryptocurrencies can be purchased via Japanese exchanges (BTC, ETH, ADA, and XRP), and less than 1/3 of the top 30 stocks can be traded.
For example, Coinbase, a cryptocurrency exchange that is also listed on the US market, handles 150 stocks in the US, but only 5 stocks in Japan.
This is a situation where Japanese individual investors cannot invest in very promising stocks at the top of the market capitalization even if they try to invest in the growing Web 3.0 industry.
Cryptocurrency Prices by Market Cap by CoinGecko
If one wants to buy a cryptocurrency that is not available in Japan, he or she must send the cryptocurrency to an overseas exchange and buy it there. This is clearly a lost opportunity. The freedom of investment choice should not be determined by regulations or exchanges, but should be available to investors themselves.