[Applause] y Japan is so back it's now been 10 years since the fall of Mount gax and for most of the last decade Japan has been overcompensating with some of the world's strictest crypto rules and regulations but now the government is finally loosening the screws and this could be setting the stage for a face melting comeback for Japan's crypto industry and market so if you're holding crypto you don't want to miss this stay tuned ah the summer of 24 It Feels Like Only Yesterday the bank of Japan hiked its policy rate to 0.15% and nuked
BTC all the way down to 49k still gives me nightmares now I'm sure Japan didn't do it on purpose crypto was just collateral damage from the unwinding of the Yen carry trade and if you don't know what I'm talking about then maybe go watch this video first anyway intentional or not that crash left a nasty scar on the chart as if to say fade Japan at your peril of course the fate of the Yen Japan's economy and monetary policy are hugely important for financial markets in general and crypto is no exception but when it comes
to crypto specifically Japan is one of the most important players in the world the Japanese yen is the world's third most traded fiat currency for BTC behind only the US dollar and Korean one and if you want to know why on Earth Korean 1 is second well we've got a video about that too voila now at the time of making this video the Yen accounts for almost 9% of the world's BTC to Fat transactions this is more than double the Euro share of BTC trading which is pretty wild considering that the GDP of the Euro
zone is $19 trillion compared to Japan's $4 trillion but if you know about Japan's history with Bitcoin this shouldn't come as a shock real heads will know that Japan was home to mount Gau The Exchange that handled 70% of the world's BTC trading volume in the early 2010s until disaster struck big time and if you want the full story on that what do you know we've got a video for that too anyway after losing close to 1.5 m million BTC in Mount Gau and other exchange disasters Japan learns some hard lessons but continued to be
a Trailblazer for crypto adoption as if to Say Never Again Landmark legislation passed in 2017 made Japan the first country in the world to regulate crypto exchanges at the national level now Japan's first crypto regulations came in the form of two new laws the virtual Currency Act and the pay payment services act these laws regulate crypto as a form of payment but not a legally recognized currency nor a financial instrument at the time Japan was praised for taking crypto seriously enough to write rules for the industry instead of ignoring it or trying to ban it
as so many other governments did however these regulations proved to be a double-edged sword around the same time as Japan was tightening the screws unregulated offshore exchanges like binance kucoin and biit started popping up and growing rapidly in the early days they offered their services to users all over the world so Japan's new regulations may have protected consumers but they also put local exchanges at a severe disadvantage against these competitors Japanese exchanges were subject to strict kyc and AML requirements much earlier than exchanges in other jurisdictions they also offered few trading pairs thanks to conservative
rules that require each new listing to be approved by the Japan virtual and crypto assets exchange Association this process could take anywhere from a few months to over a year allowing the likes of kucoin and binance to eat Japan's lunch in the meantime in 2022 Japan introduced a green list system to expedite this process for certain wellestablished cryptos but this didn't exactly open the the floodgates for new listings for an indication of how behind local Japanese exchanges are Dogecoin only debuted on Japan's top Exchange in February 2024 the last time we checked the number of
trading pairs on Japanese exchanges was still in the double digits now one area where local exchanges remained competitive though was leverage trading you could trade margin or Futures contracts with up to 25x leverage in some cases in 2017 to 2018 leverage trades made up more than 80% of Japan's crypto trading volume so it was clearly popular this leverage offering likely helped stem the tide of Japanese users flocking to Offshore exchanges but alas it was not to last in 2020 Regulators put their foot down and capped Max leverage at 2x good luck getting liquidated in Japan
and then there's the small matter of stable coins making a profitable business out of stable coins in Japan requires some creativity you see issuers of US dollar pegged stable coins can make money by just sitting on their own reserves which are partially held in yield bearing assets like US government bonds at the moment you can earn a yield of more than 4% on both oneyear and 10-year bonds and if you're sitting on 120 billion in reserves like tether is well that's up to5 Billion a year in basic Al free money but Japanese government bonds they
are a different story yields there range from 0.27% for one-year bonds to 0.95% for 10year bonds and for stable coin issuers that's just not going to cut it as a business model under Japanese law the reserves backing Yen pegged stable coins have to be managed as redeemable demand deposits held in a trust with a licensed Japanese financial institution the Fiat reserves can't be reinvested elsewhere so it's pretty hard to make money the way tether and circle do this is probably why Japan's leading stablecoin operates on a completely different model so different in fact that under
Japanese law it doesn't even count as a stable coin this is the Yen pegged JPC issued on ethereum by JPC Inc despite having a 99% share of the Yen stablecoin market for legal purposes it's considered a prepaid payment instrument and not a stable coin and functionally it's a bit like a gift voucher users deposit their funds with JPY Inc in return for the equivalent sum of JPC JPC is accepted as payment in some shops in Japan too but crucially you cannot redeem your JPC for Yen there is no fat offramp as it's an erc20 token
toen it can be traded on Unis swap but liquidity there tends to be quite thin now there is another Yen stable coin called genen it's issued by GMO trust the new york-based subsidiary of Japan's GMO internet group it's listed on coinbase where it's currently racking up around $2500 in daily trading volume you won't find it on any Japanese exchanges though because stable coins issued outside of Japan were effective ly banned by the payment services Act of 2017 and you know what that means you can't distribute usdc or usdt in Japan so you won't find them
on any local exchanges either and even if they were listed non-en stablecoin transactions on exchanges are subject to a 1 million yen limit per transaction which is about $6,700 now Japan's strict rules around stable coins can help to explain the dominance of the Japanese Yen among Global Fiat to crypto trading most countries make doe with usdt or usdc but on Japanese exchanges Fiat crypto trading Reigns supreme but if you're still not convinced that Japan's crypto laws went too far don't worry I got you taxes will do it you see profits from crypto are treated as
miscellaneous income and can be taxed at up to 55% this is more than double what you would have to pay if you had invested in basically any other financial asset because they are subject only to a 20% capital gains tax at one point Japanese crypto industry insiders were complaining that they were even being taxed on unrealized crypto gains and to add insult to injury losses aren't even tax deductible and so folks with that I rest my case you can see how Japan's crypto scene began its flop era after Mount ga and the fiascos that followed
the government enacted regulations that stifled the industry and repelled investors as a result Japan had to watch its crypto Founders heiling it to other countries that were easier to do business in hey everyone sorry to interrupt the video but I just want to very quickly tell you about the coin Bureau deals page this is the place where we put together all the amazing deals and promos that we able to offer you guys exclusively as viewers of this channel head on over and you will find such things as discounts on Hardware wallets some seriously impressive trading
fee discounts on some of the best exchanges as well as some frankly mindboggling signup bonuses for some of those exchanges too the link is down below check it out when you have a moment thank me later and now back to the video now the good news is that Japanese Crypt Bros have been complaining about the situation for years and the government actually seems to have listened in October 202 21 Japan got a new prime minister in fumio kushida who took it upon himself to try and turn around the country's Fortunes in crypto and web 3
or at least he talked a good talk in that regard sentiment was hitting rock bottom right around the time kashida came to power at the end of 2021 one Japanese crypto founder spoke to coindesk about how Japan had lost to the US in Internet mobile and cars and was losing in a lot of electrical appliances to China and South Korea quote web 3 blockchain and crypto are going to be the next big movement we're going to lose again if we don't change the law and this must have been a common sentiment in Japan because just
a few months later kida's liberal Democratic party dropped its own web 3 white paper where it said pretty much the same thing quote Japan which had once led the world's crypto industry up to the mid-2010s has become a country that is avoided by entrepreneurs both domestically and internationally regulations were strengthened and the crypto industry in the Japanese Market lost its attraction many entrepreneurs and investors left Japan to seek Better Business environments now luckily the government adopted the crypto positive messaging of the white paper and before long it established a web3 policy office within the ministry
of economy trade and Industry by late 2022 the government was handing out nft Awards to Mayors in Japan who would deemed to be doing a good job separately prime minister kashida announced a plan to issue digital IDs in the form of nfts too it's not clear how much this benefited the crypto industry but it was at least a sign that the government was trying to engage with web 3 in a more encouraging development Japan's Financial Services Agency announced plans to lift the ban on foreign issued stable coins that was December 2022 and it took a
while but usdc is finally expected to get a listing in Japan in October 2024 so any day now specifically usdc is expected to debut on Japan's coin Check Exchange as part of a partnership with circle tether has however been given the cold shoulder again but well I'm sure they'll survive and for what it's worth opening the door to foreign issued stable coins should allow the use of GN in Japan but just don't count on it flipping the JPY y Monopoly anytime soon even more recently the CEO of JPC Inc announced that the company was quote
in the final stages of the review process to obtain two important new licenses the first will allow JPC Inc to sell usdc in Japan aside from its partnership with coin Circle has also invested in JPC Inc so we're not sure who will be feeding the Japanese public usdc first but we're sure sure the pi is big enough for both companies to benefit the second license is a bigger deal though because it will allow JPY C to be redeemed for Yen one: one in other words Japan is finally going to have an off-ramp for a Yen
Peg stable coin which is excellent news on the flip side it looks like JPC is additionally going to be issued as a trust type stable coin backed by reserves that will be held by Japan's largest bank m mufg this matters because this new Reserve back JPC will be issued on mufg's prgmat chain now prgmat is an interesting case because it's a private and permissioned blockchain but it supports stable coin issuance on public chains including ethereum polygon Avalanche and Cosmos even binance Japan is looking into launching a Japanese Yen stable coin on prgmat should we be
Pro prgmat then you know what that's a topic for another video anyway it looks like JPC and usdc will have Japan's stable coin Market cornered for the foreseeable future but it'll be interesting to see if crypto users who are used to trading in yen to Fe at crypto pairs will Now default to using a US dollar stable coin if the Yen continues to bleed against the dollar this seems plausible moving on the Japanese government continued its crypto positive stance into 2023 Prime Minister kashida continued bull posting calling web 3 the quote new capitalism and never
missing an opportunity to talk about nfts more importantly though 2023 was the year when the tide started to turn on Japan's crippling crypto tax regime in June the cabinet confirmed that token issuers would not be taxed on unrealized gains on their own tokens and in December it approved a proposal to scrap corporate tax on unrealized crypto gains Al together the chairman of the Japan crypto asset Business Association told coindesk that this tax policy had been forcing web3 companies out of the country by making them liable for tax before they could even turn a profit from
their business so you can imagine how welcome this news was for crypto Founders in Japan the new policy was incorporated into Japan's 2024 tax reforms which came into effect in April but the government didn't stop there in October Bloomberg reported that Japan's Financial Services Agency was launching a review of the existing crypto laws and this is very big news for two reasons a market Analyst at Japan's bit bank exchange told Bloomberg that this review could result in quote dramatic changes including scrapping a ban on crypto ETFs in Japan now how these would perform is the
million sad question the ETFs in the US us are a very tough act to follow and they made the launch of spot ETFs in Hong Kong over the summer look pretty sad by comparison but Japan's economy is about 13 times larger than Hong Kong's so I wouldn't bet on Japanese crypto ETFs being another anticlimax the second reason to get excited about the review of Japan's crypto laws is because this means the government will re-evaluate whether or not regulating crypto under the payment services Act is the best approach this is extremely bullish because any fool can
see that crypto's number one use case to date is speculation and payment comes in a pretty distant second if that when Japan wrote its first crypto rules in 2017 this wasn't so clear back then some Japanese companies were even offering to pay their workers in BTC and some businesses also accepted BTC as payment but 7 years on most people in Japan not buying crypto for the purpose of using it to pay for stuff as such the most reasonable outcome would be to reclassify crypto under Japan's financial instruments and exchange act and you know what that
would mean no more taxing crypto gains as miscellaneous income at up to 55% instead gains would be taxed at 20% in line with other Financial assets and losses would finally be tax deductible too now this is a huge huge deal and not just because some rich people would pay less tax crypto's appeal in Japan has been severely diminished by the current tax regime as the Japanese crypto industry has been telling the government for years and finally the government is going to review the rules now there is no foregone conclusion and of course the review might
not go our way but let's be real if the current laws were successfully protecting the public without completely stifling Japan's C crypto industry they probably wouldn't be launching a review if it does go our way crypto is going to become a lot more appealing to Japan's 104 million adults Japan is a fabulously rich country and is much further down the road of currency debasement by QE than any other major economy if you subscribe to the theory that BTC is a generational theat debasement trade then Japan freed from its onerous crypto tax laws might present the
ideal lab conditions for us to watch this Theory sink or swim all the way to the Moon back in December of 2021 the CEO of Japan's bitpoint exchange estimated that if the authorities were to make the tax law on crypto equivalent to that of stocks some 10 to 20 trillion yen would return to Japan's crypto markets on the higher end that's $130 billion and that's more than the current market cap of usdt with that money you could buy all of the BTC in all of the US spot Bitcoin ETFs twice over and still have enough
left to buy the entire supply of Pepe three times two now of course we don't know where this CEO got his numbers from for all we know it's completely insane back of the napkin maths but the crypto Community has been far more excited over far smaller inflows than this take the FTX estate repayments for example that's $1 billion and how much of that is going to return to the crypto Market is not at all clear if even 1/8 of the bito CEO's prediction comes to pass then it's already way more money than we're going to
see from FTX so it took almost an entire lost decade for the Japanese crypto industry but the government finally looks poised to loosen those screws and hopefully make Japan's crypto scene great again with any luck the new government will continue preaching the web 3 gospel as the now xpm kashida so often did and I'm telling you bros Japanese tax reform is not to be faded just imagine that fifth of August candle but upside down and happening all the time I could be wrong but give it a couple of months and I'll bet you a few
SATs that Japan is about to be so back okay we'll have to leave Japan's Redemption Arc there for today smash the like if you want to see 20 trillion yen flooding into the crypto Market stat if you got something out of this video make sure you're subscribed and have your bell notifications switched on so you don't miss our next upload as always thank you for watching and I will see you next time this is guy over and out [Music]
