"Japan Will Be More Crypto Friendly Than the US" — An Exclusive Interview with Monex CEO Oki MatsumotoBy Emily Parker
Japan is still one of the most important players in the crypto world. According to data from Coinhills, the US dollar is the national currency most often traded for Bitcoin, but the Japanese yen comes in second. Who are these Japanese crypto investors who apparently account for more than 20% of the world's Bitcoin-fiat trade?
To learn more, we sat down with Oki Matsumoto, Chairman and CEO of the Monex Group, the Tokyo-based financial services company that acquired Coincheck, one of the biggest cryptocurrency exchanges in Japan. He told us that Japanese crypto trade is driven by retail investors.
"The Japanese market is a retail market. The US market is an institutional market. It's similar in crypto," Matsumoto told LongHash. "Japan institutional investors tend to be very risk averse. And retail investors tend to be cowboys."
Since Coincheck was hacked in early 2018, Japanese regulators have gotten much stricter on cryptocurrency. It has become harder, for example, for exchanges to list new coins. But Matsumoto believes that things will turn around, if not immediately.
"Japan's attitude toward cryptocurrency is starting to warm up. The Financial Action Task Force (FATF) is coming to Japan to inspect in October. Up until then, FSA is not tightening regulations. The FSA also doesn't have a reason to relax before then," he told LongHash. "Next year's regulations will include cryptocurrency derivatives and some kind of clarity for Security Token Offerings (STOs). So in 2020 we will see more activity. Not just trading activity, but new products and services."
"The long-term trend is positive," he says. "Although retail crypto trading activity is generally quiet right now in Japan, we still probably have the most advanced legal framework on cryptocurrency in the world. So sooner rather than later, we will see a resumption of retail crypto trading."
"At the end of the day Japan will be more crypto friendly than the US. Japanese retail investors are more willing to take risks."
The larger problem is that for now, Japan's crypto world is pretty much only retail investors. "We don't see any institutional money coming into crypto. In Japan institutions are always late, retail comes first. Japan is probably the most advanced retail market, even compared to the US. People in Japan trade individual shares, FX, and buy foreign mutual funds. But we lack the width and depth of capital markets players. You don't have small hedge funds or family offices that trade like in the US," Matsumoto says.
"There is a huge opportunity for institutional crypto business in Japan. There is no one there."
How does he explain this absence? "Japanese institutional investor fund managers are salarymen. They don't have good incentives. They are paid not to make mistakes," Matsumoto says. "It doesn't pay to go into new territory. It's risky to screw up. Institutional investors may be scolded by the asset owners. They have a very strong risk aversion tendency. That's been the case for a long time."
He says that one "crazy idea" would be to create a global index, not just including shares but also commodities and crypto. "Indexes tend to be stocks and bonds. But what about an index including crypto, passively managed? Indexation is one effective and efficient way to get institutions involved, because institutions don't have to make decisions."
Matsumoto argues that Japanese institutional investors would benefit the global crypto market. "Having more Japanese institutional investors in the crypto market would bring much more stable liquidity, and it would probably reduce volatility and help the price finding process. If institutional investors get involved, it will provide more liquidity into the coin lending market and that could reduce volatility."
US institutional investors play a major role in crypto, but they're not enough. "We need more diversified players in the market to reduce volatility," Matsumoto explains. "US institutional investors may be too influenced by the Securities and Exchange Commission (SEC)."
He says he is working on this problem, and is having discussions with institutional investors as well as the custodian industry "to try to find the best way in Japan to foster institutional activity."
"Libra will be one of the most democratically operated stablecoins"
Even as many have criticized Facebook's new stablecoin, Libra, Monex Group has enthusiastically applied to join the Libra Association. "You don't get the tiger's baby unless you go into tiger's den. We decided to be a part of Libra. They decide if we can get in," Matsumoto says.
Mastusmoto is very bullish on Libra. "Libra will be one of the most democratically operated stablecoins," he said. "The Libra Association will have 100 companies: MasterCard, Visa, huge companies. Can you imagine any better operator? It will be great companies from all over the world, and they will come together to try to democratically operate the Libra Association."
This will be a far more democratic option that some of the other cryptocurrencies out there. "Meanwhile, you see Iran backing their own version of a gold backed cryptocurrency. Do you want Iran coin to prevail more than Libra? No way," he says.
He also believes Libra is superior to Venus, Binance's new open blockchain project for developing stablecoins. "Libra is better than Iran's or Venus," he says. His view is that Libra will be backed by 100 world renowned companies, while Venus has one company: Binance.
Mastumoto understands that not everyone will like Libra. "Libra will be bad news for small countries. Some small countries' currency may just go away. It will be better to own Libra than a national currency that can be devalued very quickly." But people from countries like these already prefer dollars over their domestic currencies, he notes.
"It's dollarization. Libra is just a new version of dollarization."