A recent report from the Japanese financial regulator, Financial Services Agency (FSA) has revealed that that the number of inquiries concerning virtual currencies has dropped from 574 in Q1 2019 to 494 in Q2 2019. Is this data indicative of the fact that the hype around cryptocurrencies in declining in one of the most crypto-friendly countries in the world?
Changing Regulatory Environment in Japan
This drop in the number of cryptocurrency-related inquiries has been consistently happening from the last year. The number of cryptocurrency-related inquiries stood at 1602 in Q2 2018 and fell to 1231 in Q3 2018. In the December quarter of 2018, they had reduced to 788.
This year, in Q1, they were at 574, and in Q2, they plunged to 494.
The reason for the decline in the number of inquiries around cryptocurrencies may be attributed to the fact that the Japanese regulators are implementing strict controls in this market. In May last year, Nikkei Asian Review had confirmed the FSA was tightening regulations around how crypto exchanges would operate to prevent another $532 MM Coincheck-like hack in the future.
The Japanese regulator now requires exchanges to monitor customer accounts regularly for suspicious fluctuations, make a distinction between managing client assets from those of the exchange, and store crypto holdings on offline systems only. Exchanges also have to comply with stricter anti-money-laundering (AML) measures, including rigorous know your customer (KYC) procedures such as ID verification.
In June 2019, the FSA took strict administrative action against FISCO Cryptocurrency Exchange for violating laws concerning business management. Recently, Coincheck also announced that it is reducing the size of leverage available for margin traders from five times to four times, in accordance with the best practices given by the Japan Virtual Currency Exchange Association (JVCEA), a self-regulatory body for the Japanese crypto exchange industry.
Cryptocurrency-Related Developments in Japan Speak Differently
While cryptocurrency-related inquiries might be on the decline, but the developments in the Japanese cryptocurrency space indicate the size of the crypto-holding audience is large enough to attract investments in new infrastructure.
Rakuten, Japan’s e-commerce giant recently launched spot trading services to the public. The exchange currently offers support for BTC, ETH, and BCH. Also, in July, the FSA revealed that 110 crypto exchanges were were in stages of registration for getting licensed to operate in Japan.
Most Traded Fiat Currency for Bitcoin is Not Yen Anymore
It is worth noting that Yen now enjoys a far smaller percentage of trade against bitcoin than it used to nearly 6 months ago, which indicates that the Japanese, maybe losing interest in cryptocurrencies after all. According to a February 2019 article by longhash.com, Yen was responsible for nearly 50% of all the trade done with fiat currencies. Now, this percentage stands at 17.55.
The top fiat currency which is being used in bitcoin trading is the US dollar with a share of nearly 73%. It is not surprising to see this percentage given the major development which happened in the US crypto space – Bakkt’s launch which is supposed to bring in institutional investment and in this space and change its face forever.