The Mt.Gox scam and Japanese crypto regulation | Cointelegraph Documentary

Like, what's the real story behind it?

We are sorry for the troubles.

Goes like this. The other ones that take a very long time. Same here. Yeah, sure. I read about bitcoin. It wasn't until 2012, and I had just moved to Taiwan. I had quit my job at a law firm, and I wanted to take a year and study Chinese and kind of have some fun before I went back and figured out what to do for a career. Bitcoin was maybe like $20, and I didn't invest. So I was trying to figure out what to do. And the only place to buy it was this shady exchange in Japan that I didn't trust. 2013, the price went worse. It spiked like $150 because there were bank runs in Cyprus and people were getting their money out of Cyprus by just buying bitcoin. I said, this is the time to buy. And the price came back down, like $100, just under. And I threw, like, half of my money I had at the time in. And I was really regretting it. I was so pissed off. Like, I could have made all this money had I just chanced it on this shady exchange in Japan. And then I was in. And it turns out I was right about the shady exchange in Japan because less than a year later, I had lost everything. Right now, if companies want to have an exchange in Japan, they have to get a license from the fsa. And then even then, if they want to list any new tokens, they have to get from Mission for every single one. And, you know, when China banned ICOs last year, like, China had the most activity in the world and they all wanted to come to Japan, and then they quickly gave up because they realized it was impossible. And now it's even harder. The communication issue is surmountable because you can just hire people who speak Japanese, right? But the real issue was it's not clear. Everything has to go through fsa, and FSA decides whether or not you can list a particular token. Who knows how long that takes? Even in Japan right now, a lot of people want to invest in ICOs, and a lot of companies want to raise money in ICOs, and they just won't let Japanese invest because they don't want to get in trouble in Japan and the regulations are not clear. And same with the US and same with China. You need to keep people safe, but also need to make sure businesses can operate. This is actually a great opportunity for Japan, and it's what I want to talk to the legislators today about, because, you know, Japan is Like, you know, seated between the US and China and has to figure out a path to develop its economy further. It's the world's third biggest economy, but it still has a lot of issues to growth. And so cryptocurrency could be a great strategy. The US and China are not really being clear. And if Japan is, they could attract a lot of business. But if they're not, it's all going to be legal. I think I have more friends here than almost anywhere else. Even more than in New York City. I don't know. I have a lot of friends in New York City, but I, I haven't been back. I have more friends in the crypto world, I think in Japan than maybe anywhere else. I met most of them here actually in 2014. I came here and everyone had lost money there and we all became friends and we're still friends to this day.

Hello.

I would have never expected years later I'd be like, you know, in Tokyo and going to the courthouse and all these things.

There.

So.

It'S. In the breath of state. The three functions of money in the classical economic textbook that you all studied can be distinguished. But only sovereign backed currencies have the three attributes. With all the attributes of a sovereign currency, what is it that has created the interest for Bitcoin and other cryptocurrencies? It is the creation of computers. And nobody has the responsibility for crypto assets. There is no government who has a foreign exchange policy. There is no central bank that has a monetary policy linked to that. If you are so volatile, you cannot be an instrument of payment or a unit of account.

Securities laws in the United States are intended to, and all over the world are intended to benefit individual investors. But what if these investors do not want the protection of those laws?

But the reality is, what we found is that a number of issuers did not even exist and there have been some fraud. It is not something that I would attribute to the Bitcoin or anything like that. I just attribute it to the way those transactions that were unregulated eventually ended up.

Who determines what is money? Do people determine what is money? Or do governments? And if it's governments, why should government have this power?

You are the proof exactly of what I'm saying. You're a populist, and that's fine. You're entitled to do that. The reality is a sovereign currency is the privilege of a sovereign, and that is decided by the sovereign. Period.

Long before governments existed, people chose what was money. And right now, young people are choosing to put their trust into cryptocurrency. It's worth examining why they're doing this.

Money was issued by dukes, marquesses, princes and kings. That's exactly what Japan does for the young. That is the tradition where the sovereign takes responsibility. The model you are promoting is a model where there is no authority who can make sure that the way it develops is interest of the country. And I think that is where I am absolutely clear. There is only one currency per country, and it is essential to the economy of that country. Trying to say that it's one and the same and that the people have to decide on the currency doesn't, in my view, serve well the economy.

Long before money was issued by governments and kings, people used seashells and other commodities as money. And in the end, governments can issue currency, but people can choose which to use. That's why many people choose to use the US Dollar and not the Zimbabwe dollar. That was great. I knew he was fixed. He didn't even wait for a translator. He goes, you're a populist. You're a popular. Yeah, you're a populist. You're Donald Trump. I'm like, mission accomplished when he got pissed off and said that. But, you know, look, that's the point, is to have a discussion. And when, you know, he wanted to have a discussion about particulars of policy and not about what underlies the whole policy. And that's really the discussion that we need to have.

So.

Absolutely. Yeah. It really made the whole thing very interesting. It was a great idea to put. Actually bring you along because that really created this whole, you know, happy. I'd love to do more of this. Yeah, let's do it. Yeah. So I guess what we need to hear in Japan is to address and educate the Japanese. Yeah, Politicians. Politicians and bureaucrats. You know, I didn't know what to expect walking in to the conference. I didn't know he was going to be there. I didn't know. I just thought I was going to be giving some remarks on my thoughts about Japan's legislation and where it should go. And once he started giving his talk, I real. I quickly realized the direction things were headed. And, you know, he was very biased. Had a lot of. There's so much more I wanted to say, but, you know, there wasn't enough time and, you know, saying that bitcoin is just, you know, used for money laundering and all that type of stuff. I mean, so is cash. There's a lot more money laundering going on with cash, and there's no distributed ledger to track it all through. So, you know, the other interesting thing I raised to him that he didn't want to discuss after the whole discussion we had, was that the reason for the US's position is largely because, you know, initial public offerings are at like a 20, 25 year low. This is because regulation is too strict and there's a lot more private capital, so people don't need public markets. And the SEC wants to fix this. And along come ICOs which threaten the entire model. I think I had a very, I have a very unique vantage point because I spent so much time in Japan. I understand as well as anyone why Japan passed regulation. I don't know what Japan's going to do, but I'm not. It's also a long shot, right, that Japan's gonna pass some legislation that's meaningful because other countries are doing the same thing. And frankly, I think they'll make it much easier for people to do business there. Like Malta pass is pretty good. I think Bahamas and Cyprus are also looking at pretty good legislation, talking to them about it. And people are free to go and invest where they want to. So if you're an investor in Japan, why would you. What you should be doing is you should set up a company someplace in like Hong Kong for $1,500 and do all your trading through that and then you pay zero tax. If you trade as a Japanese person, you'll pay 55% tax. Like why it's a no brainer. I think if countries like Japan don't take a forward thinking approach, they're just going to push all the cryptocurrency activity to other places. And the Internet will let that happen very easily. But what I wanted to tell the legislators too is that it's a great opportunity for Japan because Japan has a lot of issues facing its economy and how to grow it. And it's the third biggest economy seated between the US and China. Both US and China have sort of rejected cryptocurrency for different reasons. China to prevent capital flight and the US to protect itself IPO market. And so that leaves Japan with like the, a great solution. If they embrace cryptocurrency, they can, they can catch the wave. And you know, the US and China would miss out. Give them a lot of bargaining power. So that's kind of the message I want to deliver to legislators. I think Japan, though, to their credit, is doing a lot more to try to understand it and allow it to exist, but the current legislation is just not doing that at all. It's pushing business away. So they I think they understand this from the talks I've had with a few legislators. They know it's not working. The question is what to do about it. And the other question is Japan. I learned from Mount Gox, the government and legislature and courts move very slow. So once they get something in place, it can be quite powerful. But for Japan, the question is whether they can get it in place in time. Everyone's already setting up in Malta and other places, so they do something. They want to make sure it's done right and according to the process, which takes time. I mean, I don't fully understand the government in Japan. I think it's quite unique. But I do know some things from my experience, and any solution is just going to take time. Cointelegraph like subscribe and Hodl.

Sam.