In the world of cryptocurrency, Japan is most famous for being the first country to officially recognize Bitcoin as a legal form of tender. Since then, a slew of regulatory actions, in particular against cryptocurrency exchanges, has caused some to accuse the Japanese government of stifling innovation in the sector. Any crypto enthusiast who has spent time in Tokyo will realise, however, that there is a very active community here and a lot happening behind the scenes.
In order to get a better view of how the market is developing, we spoke to Hiro Shinohara, co-founder of Sivira.co, and also a member of the original team behind this website, BitBiteCoin. Hiro has been deeply involved with cryptocurrency in Japan since the early days. Having supported cryptocurrency businesses like Genesis Mining and BnkToTheFuture and introduced blockchain innovation to corporations like GMO Internet and Panasonic, he has a deep network and a broad view of events within the industry.
BitBiteCoin (BBC): First off, I want to talk about Japan. Around this time last year, there was a lot of excitement about the potential for Japan to lead the world in blockchain innovation. Since then, the Financial Services Agency (FSA) has clamped down on exchanges, Coincheck was hacked, and it has become harder to launch ICOs. Are you optimistic about Japan’s prospects as a world leader in blockchain innovation? What do you think Japan needs to do differently if it is to succeed?
Hiro Shinohara (HS): I have written about this in detail here. In my view, the FSA’s approach is harming innovation in the industry. By focusing on restriction rather than promotion, Japan will also lose out on opportunities to lead in the cryptocurrency exchange space.
On the other hand, mining businesses are still alive here and many blockchain companies are doing well. Some major exchanges are developing their own blockchains, and even some public companies and famous startups are using blockchain technology in order to innovate, such as GMO Internet, Gnoxy and Anypay.
Blockchain technology will continue to develop in Japan without ICOs until the government makes some positive decisions regarding cryptocurrencies
BBC: What role do you see Japan playing in the development of blockchain globally?
HS: I think that a lot of use cases will emerge from Japan, particularly in big business. I expect that many public companies will start talking about how they use blockchain technology in their businesses.
BBC: What is the most interesting positive project coming out of Japan right now?
HS: While it does not count as a new blockchain technology, GMO’s mining business is awesome. As a Japanese company, their approach to building machines reminds me of the golden era of Japanese entrepreneurship and technology innovation. It shows that Japanese companies’ greatest strengths are still alive in the cryptocurrency market.
This is why I said that mining businesses are still alive. Not only that, but unlike exchanges, mining is not yet regulated and does not yet have clear guidelines. Most of the companies interested in holding cryptocurrencies are getting into mining businesses for this reason.
BBC: You also do some work in China. Can you tell us your experience of the blockchain community/market there? What is the most exciting thing you have seen?
HS: It’s the people, for sure. There is a huge variety of people involved in cryptocurrency, ranging from highly talented and experienced engineers to intelligent and visionary investors.
I think that, because of the actions of the Chinese government, a lot of capital, talent and projects are finding opportunities outside the country. This is making a new ecosystem and causing new chemical reactions across the Asian market.
China is the Silicon Valley of cryptocurrency.
BBC: You work to help both big corporations and startups use blockchain technology. Can you give a detailed example of how you have helped a large corporation use blockchain technology, and what kind of impact it had?
HS: Most Japanese business managers and investors know that cryptocurrency and the blockchain present one of today’s biggest business opportunities. But as I mentioned earlier, due to regulation, they cannot always touch cryptocurrency businesses. That is why they are starting with blockchain businesses, and dreaming how they might be able to engage with cryptocurrencies or ICOs later.
Moreover, Japan already has many point-system services like CCC’s T-Points: “Give points away and get private data”. Blockchain can help these businesses to launch new initiatives on the blockchain with a view to, eventually, develop these into cryptocurrency businesses.
BBC: What do you think that most people still get wrong about blockchain today?
HS: They just don’t understand decentralization. They think blockchain works in a similar way to cloud services. Giant companies can reliably use blockchain to control the market, or reduce cost, or make profit from ICOs etc. But that won’t happen.
BBC: We still seem a long way from widespread adoption of blockchain technology and cryptocurrencies. What needs to happen to change that?
HS: The concept behind the blockchain, “decentralization,” is still in the dark. People are only looking at the price of some coins or at use cases from giant companies. The real innovation is happening inside small tech-oriented startups and DAO-type organizations. These innovations are unlike anything produced by the previous generation. It is not all about making a huge profit for one organization. This is the reason why most of people don’t pay attention, and VCs are not fully focusing on that. A lot is happening behind the news.
BBC: Hiro, thank you for taking the time to speak with us.
HS: My pleasure!