- The Japanese yen accounts for more than half of traditional fiat currencies that are traded into Bitcoin.
- The Japanese government has taken a more positive stance towards Bitcoin, legalising it as a mean of payment in April last year
- Despite that, last Friday’s hack of Japanese exchange Coincheck highlighted the risks for crypto investors, as global regulators continue efforts to monitor the asset class.
Research from CLSA shows that the amount of traditional fiat currency traded into Bitcoin varies wildly by country.
According to CLSA analyst Nicholas Smith, Japan comfortably tops the list — accounting for more than half of all national currency traded into Bitcoin.
Here’s the breakdown:
Smith said the current paradigm was largely due to policies implemented by the Japanese government, which has taken a more pro-cryptocurrency stance than the governments of its regional neighbours.
“While China and Korea have been scrambling to close down exchanges and clamp down on cryptocurrencies, Japan in April 2017 passed a law — the Payment Services Act — recognising cryptocurrencies as legal tender,” Smith said.
“The result was that China — which had dominated Bitcoin trading — dropped off the map, while Japan has risen to number one.”
Although Bitcoin has been legalised in Japan for use in transactions, Smith said the country’s banking regulator — the Financial Services Agency (FSA) — has made efforts to warn people about the risks of cryptocurrency trading.
And those risks were made plainly evident last Friday, when hackers compromised the Japan-based Coincheck exchange and stole $US543 million worth of the NEM cryptocurrency.
The hackers have subsequently tried to sell the NEM tokens on six different exchanges.
According to CLSA’s Smith, Japanese crypto exchanges had until the end of September to register for FSA approval.
In establishing its approval guidelines, “the FSA formalised rules on anti-money laundering (AML) and released standards for security and audits”, Smith said.
“Currently, 16 exchanges have received the approval of the FSA; 16 have yet to receive approval but can continue to operate while working towards completing the approval checks – and Coincheck was one of those still working towards approval,” he said.
The Coincheck breach is likely to have far-reaching consequences for exchanges globally.
Earlier this month, the Australian government announced that the Australian Transaction Reports and Analysis Centre (AUSTRAC) will be given new powers to monitor Australian-based cryptocurrency exchanges, with a focus on money laundering and illegal activity.