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Coinbase Takes a Step Further into the Japanese Crypto Market

Coinbase has been licensed in Japan since 2019 and has registered as second-class members of the Japan Virtual Currency Exchange Association (JVCEA), a self-regulatory organization for the crypto industry in Japan.

Along with Coinbase, Digital Asset Markets, and Tokyo Hash have also registeredas second-class members according to the JVCEA. Joining as second-class members with the agency allow the companies to be registered as crypto exchange companies.

Coinbase has also previously partnered with the Bank of Tokyo-Mitsubishi UFJ as a part of Coinbase’s expansion into Asia.

The cryptocurrency exchange also launched Coinbase Custody in 2017 for institutional clients such as hedge funds and family offices. Its assets under management have over $7 billion in cryptocurrency assets, with its acquisition of Xapo’s institutional custody business in August 2019.

The international launch of Coinbase Custody

The international launchof Coinbase Custody is said to meet the demands of institutional investors in Europe and beyond. Due to client demand, the company expressed that Europe is its fastest-growing geographic segment. The company is planning to support more digital assets in the future, along with new features.

Coinbase was awardedan e-money license in October 2019 in Ireland by the Central Bank of Ireland and has allowed the company to expand its Irish operation and “deliver a better product to its customers across some of their fastest-growing markets. It will also enable them to secure passports for their customers across the EU and EEA.”

The Japanese fintech market

Tokyo, the capital of Japan has been rankedas one of the top 12 FinTech hubs in the world by Deloitte’s A tale of 44 cities: Connecting Global FinTech: Interim Hub Review 2017. The Tokyo Metropolitan Government (TMG) created policy outlines to form the city with the vision of an unrivaled global financial center.

Blockchain.News spoke with three representatives of three different associations, to find out more about the Japanese FinTech ecosystem at the Asian Financial Forum(AFF), including FinCity Tokyo, FinTech Association of Japan, and FINOLAB.

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Japanese Crypto Trading Activity Fell as COVID-19 Pandemic Hit in March

The Japan Virtual and Crypto assets Exchange Association has reported that during the COVID-19 pandemic there has been a decline in active crypto-trading in the country.

A report updated by the Japan Virtual and Crypto assets Exchange Association (JVCEA)—Japan’s self-regulating body—revealed that the number of active Japanese crypto-traders fell during the COVID-19 pandemic lockdown.

The data originally published in March indicates that even before the COVID-19 pandemic lockdown, cryptocurrency exchanges in Japan had recorded an increase in fiat deposits but an overall decrease in crypto asset trading.

According to the JVCEA, crypto accounts registered in Japan fell slightly from 2,048,501 in February to 2,044,806 in March—a relatively small decrease of 3,695 of active Japanese crypto-trading accounts.

Crypto Liquidated for Raised Margin Calls

In a blog post, a Japanese Market Analyst named Yuya Hasegawa explained that the slight drop in active crypto accounts did not mean that Japanese investors have lost interest.

In his report on August 3, Hasegawa wrote that based on the JVCEA data—fiat deposits on exchanges in Japan had shown an increase, despite the lower activity of cryptocurrency trading in March.

Hasegawa said, “When the Corona Shock hit the wider financial market and generated demand for margin calls, a good chunk of investors may have withdrawn all their funds to scrape together some cash.” A margin call refers specifically to a broker’s demand that an investor deposit additional money or securities into the account so that it is brought up to the minimum value, known as the maintenance margin.

According to Hasegawa, it is unlikely that the decrease in active accounts will have a lasting impact on the Japanese crypto market since the stock market has stopped plummeting and bitcoin sustained relatively high volume during April and May.

He added, “Also, it was quite surprising to see the decrease in the number of active accounts since it kept growing regardless of market trends or price actions, we believe this does not necessarily mean that the Japanese users are losing interest in cryptocurrencies.”

Japan’s New Crypto Friendly Financial Commissioner

Cryptocurrency trade may in fact be getting a good dose of clarity on digital asset trading and tax commitments, which has been a grey in area in Japan for some time.

As recently reported by Blockchain.News, the Japanese government has appointed Ryozo Himino as the next commissioner of the country’s Financial Service Agency (FSA). The crypto-friendly leader is likely to push positive reforms in the industry. A formal announcement is expected to be made later within this month.

Currently, Himino previously served as the International Financial Deputy Counselor, a position that has made him widely known on the international stage. Last year in September, Himino became the first Japanese Chairman of the Standing Committee of the Financial Stability Board (FSB).

Japan's JCBA Submits Initial Proposal for IEO Regulatory Reform to JVCEA

Key Takeaways

JCBA (Japan Cryptocurrency Business Association) submits initial proposal for IEO (Initial Exchange Offering) regulatory reform to JVCEA (Japan Virtual Currency Exchange Association).

The proposal outlines four key agendas aimed at stabilizing the IEO market.

The reform aims to enhance user protection and promote domestic IEOs over foreign exchanges.

Introduction

The Japan Cryptocurrency Business Association (JCBA), headquartered in Chiyoda, Tokyo and led by President Hiroshi Hirosue, announced the submission of an initial proposal for the reform of the IEO (Initial Exchange Offering) system. The proposal was developed by the ICO & IEO Subcommittee, chaired by Seihiro Yoshida, and submitted to the Japan Virtual Currency Exchange Association (JVCEA), led by President Genki Oda.

Background and Current Issues

Since May of this year, the ICO & IEO Subcommittee has been actively discussing the future of the IEO system, leveraging insights from various businesses involved in cryptocurrency and Web3. The proposal consolidates these discussions and has been submitted to JVCEA, a self-regulatory body for cryptocurrency exchanges and related derivative trading.

Four Agendas for IEO Reform

The proposal outlines four key agendas for reform:

Price Determination: Diversification of pricing methods and explicit warnings about pricing.

Liquidity: Setting liquidity targets at the time of listing and ensuring a conducive environment for liquidity.

Price Stability: Establishing rules for price stabilization measures at the time of listing.

Sale Restrictions: Formalizing and tightening lock-up regulations for issuers and underwriting exchanges.

Future Directions

The proposal is an initial draft discussed solely within the JCBA. Future discussions will involve various stakeholders and focus on the feasibility of implementing these reforms within the scope of self-regulatory rules.

The reform aims to encourage users to manage their assets under Japanese regulations rather than using foreign exchanges, thereby enhancing user protection.

Disclaimer & Copyright Notice: The content of this article is for informational purposes only and is not intended as financial advice. Always consult with a professional before making any financial decisions. This material is the exclusive property of Blockchain.News. Unauthorized use, duplication, or distribution without express permission is prohibited. Proper credit and direction to the original content are required for any permitted use.

Proposal to Amend Cryptocurrency Leverage Regulations in Japan

On October 17, the Japan Cryptocurrency Business Association (JCBA) presented a proposal to the Japan Virtual Currency Exchange Association (JVCEA) to review the leverage ratio in cryptocurrency margin trading, according to Coinpost. JCBA argues that the current leverage ratio is overly restrictive compared to other derivative markets, suggesting a shift to a calculation method based on past price volatility (volatility), and has sought cooperation from JVCEA for the realization of the amendment proposal.

Previously, the maximum leverage of 25 times, akin to the domestic Forex (foreign exchange margin trading) market, was set for individual trading in cryptocurrency margin. However, it was reduced to four times in October 2019, and further lowered to a uniform two times in May 2020 following the enforcement of the amended Financial Instruments and Exchange Act.

On the other hand, for corporate transactions, a method of calculating leverage based on the past weekly price fluctuations of individual stocks had been introduced. Now, JCBA is advocating for the application of this corporate method to individual transactions as well. Currently, the leverage for corporates ranges between four to nine times.

Trend Towards Volatility Stabilization

Four years post the amendment of the Financial Instruments and Exchange Act in 2019, the cryptocurrency market has seen expanded global recognition and an increase in participants. Consequently, since the peak in early 2018, the price fluctuations in cryptocurrency have decreased, along with a decline in speculative elements.

In Japan, recent years have seen the progression in the establishment of stablecoins and tax systems, including the development of financial product transaction operators handling them, while the regulations on leverage trading have remained unchanged since the legal revisions of 2019.

In 2019, the social perception towards cryptocurrency was generally that it “mainly encourages speculation”. However, of late, there has been an increase in uses such as NFTs, payments, DAOs, and asset preservation. “To recognize cryptocurrencies as a formal asset class, it’s essential to develop the derivative market following the development of the spot market,” emphasized JCBA. There’s also an intent to attract users who moved to overseas exchanges in search of higher leverage back to Japan through the amendment of leverage ratios.

Impacts of Reduced Leverage Ratios

Since the legal amendment, trading volume and open interest have drastically decreased, particularly the decline in cryptocurrency margin trading compared to spot trading is notable.

According to the data released by the Japan Virtual Currency Exchange Association, the effect has led to the financial instability of domestic exchanges and a subsequent outflow of individual investors seeking high-leverage exchanges abroad, contradicting investor protection viewpoints.

Currently, a leverage of 25 times is set in Forex trading, and the domestic trading volume in the fiscal year 2022 grew to a colossal market reaching 1,074 trillion yen. Nevertheless, JCBA highlighted that individuals tend to restrain risk, with the effective leverage being kept at four to five times.

The proposals by JCBA will be reviewed within the certified self-regulatory organization (JVCEA) and concerned parties. JVCEA holds the position of a certified self-regulatory organization under the Payment Services Act as “Certified Payment Settlement Business Association” and under the Financial Instruments and Exchange Act as “Certified Financial Instruments Trading Business Association”.