US$1 billion down, why is Japan still in love with bitcoin?

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Even as other Asian nations pull back, the world’s two largest cryptocurrency thefts haven’t turned Tokyo off the blockchain phenomenon

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The Virtual Currency Girls, a Japanese pop group. Photo: Reuters

Gavin Blair

Published: 7:03am, 5 Feb 2018Updated: 10:38pm, 6 Feb 2018

The two largest cryptocurrency heists in the world with losses totalling almost a billion dollars at exchanges in Tokyo, and a cultural tendency towards conservatism, seem to have barely dampened Japan’s enthusiasm for bitcoin and other cryptocurrencies.

Decades of stagnation since the bursting of the bubble economy at the dawn of the 1990s has left the government grasping for growth drivers. While Prime Minister Shinzo Abe’s “Abenomics” brought some relief, the shrinking population and tax base, combined with massive national debt, mean the longer-term prognosis remains precarious. Cryptocurrencies and the related technologies offer potential for growth, tax income, and a leadership niche for Japan as other regional economies such as China and South Korea push back against them.

Koichiro Wada, president of Coincheck, apologises at a press conference after about US$500 million worth of the NEM cryptocurrency disappeared due to hacking. Photo: Kyodo

China has banned cryptocurrency exchanges and almost all related activities, while South Korea has banned anonymous transactions, one of the major attractions of cryptocurrencies, but stopped short of the outright prohibition it originally appeared to be threatening. The Japanese authorities, in contrast, have been far more welcoming.

“There are estimates that tax revenue from the cryptocurrency business, including capital gains taxes from individual investors and from corporations, could amount to 1 trillion yen (US$9.2 billion), though that is very speculative at this stage,” said Takashi Shiono, an economist at Credit Suisse in Tokyo.