Japanese authorities are said to be looking at ways to relax the country’s laws regarding cryptocurrencies as more and more companies see the potential of blockchain. The decision of Japan can be attributed to the increasing appreciation of the impact of blockchain technology to business operations and the overall economy.
Since the country is well-aware of its strict financial policies, relaxation of crypto laws may usher in more innovation and possibly attract more blockchain firms thus placing Japan strategically in the international digital economy.
Japan’s Regulation of Cryptocurrencies
Japan is one of the first major economy adopters of cryptocurrency, it was among the first countries to enact on regulation of the cryptocurrencies. Following the Mt. Gox incantation in 2014 where over $400 million in Bitcoins was stolen, Japan put in place adequate legislation that can protect its investors and the financial system from instances of the crypto-currency being abused.
However, the above regulations have also been perceived as a double-edged sword in so far as it has offered a free reign to companies willing to come up with out-of-the-box solutions in the blockchain market.
As for example, Japan’s Financial Services Agency or FSA demands exchange registration and adherence to a number of principles. Some of the regulations include the Know Your Customer (KYC) policies, anti money-laundering (AML) policies and the minimum capital regulation. Although these steps were crucial to build this confidence and assurance, it hampered competition with little players and slow the development of prominent blockchain solutions.
Calls for Looser Regulations
Thus, with the fast-growing sector of blockchain businesses, it is a matter of time that Japanese officials and policymakers discuss the relaxation of some of these measures. This evolution occurs as blockchain applications go beyond the confine of being a tool for Cryptocurrencies and shifts towards different areas including supply chain, medical, and finance. Large Japanese firms have already started venturing into blockchain projects which has forced regulators into a rethink on how to manage crypto.
For example, companies are searching for the possibilities to apply the blockchain for their current activities to enhance the transparency and effectiveness. To achieve this, Japan has sought to decentralise the regulation of crypto which reduces the impact of compliance and encourages companies to adapt to the technology to the fullest.
Driving Blockchain Innovation
Japanese companies have been testing blockchain’s possibilities for disrupting several industries, indicating that the country requires more favorable conditions. Thus, the application of this technology gives benefits in its efficiency, cost effectiveness, and security that is quite appealing to industries that want change.
Blockchain is able to disrupt the industries such as finance where decentralised ledgers may help to decrease the fees and the time of transactions. Similarly in the field of healthcare, blockchain could mean having secure and immutable Electronic Health Record, which eases the process of patient care. It could also be used in areas where smart contracts, which are contract executable on the blockchain, could totally eradicate the need for middlemen such as lawyers.
Understanding this, Japan may lead the companies into these emerging opportunities by easing crypto regulations. It also expected that the government is likely to back up the adoption of the blockchain via partnerships between the private and the public sectors and thereby taking the nation nearer to being a Blockchain friendly nation in Asia.
Global Context and Competitiveness
Japan’s potential regulatory change is occurring whilst the rest of the world, including South Korea, Singapore, and the EU are trying to position themselves as friendly to blockchain. Therefore, the view of Japan to remain competitive in this world characterized by the emerging trends in the development of blockchain technology will depend on the established ability to respond to new requirements.
The decision to engage in the idea of a lighter regulatory approach for cryptocurrencies may place Japan on an equal level with countries, such as Singapore that is already making considerable progress on the creation of an ideal climate for participants in the field of blockchain businesses. The global blockchain market is predicted to grow to billions of dollars in the future and if Japan wants to grab a big piece of it then it must regulate the market in a way that encourages new blockchain-based businesses while protecting investors.
Relaxing of some of these rules could mean great potentials for Japanese firms to benefit from the changes brought by blockchain technology.