Japan’s Bitcoin exchanges self-regulate as currency split threatens

Bitcoin

19 July 2017. By Toko Sekiguchi.

As Bitcoin traders the world over await the outcome of the battle over blockchain management between the cryptocurrency's miners and users, Japanese Bitcoin exchanges are partly suspending operations to protect clients from technical glitches and potential major security risks that may arise next month.

Japan Cryptocurrency Business Association on Tuesday issued a joint statement with 13 of its member exchange operators stating that they would suspend Bitcoin deposits and withdrawals from Aug. 1. That's the date the standoff between the gatekeepers and user-developers of the world's largest cryptocurrency over the management of its blockchain will come to a head.

The statement, which said the exchanges would decide by Aug. 4 whether to return to regular business, was signed by all but three of the Bitcoin exchanges operating in Japan. Japan's biggest exchange, bitFlyer, is not a JCBA member, and the other two exchanges are pondering the details, MLex understands.

Additional precautions will be taken by each business. A CEO at one of the exchanges told MLex that it would likely halt trading for one day. "But with the complexity of when the fork could happen, it's difficult to assess now," the executive said.

The JCBA has limited its suspension to withdrawals and deposits because trading, up to a certain scale, won't require exchanges to access blockchain data.

"Depending on how things turn out, there is a possibility that this could have the effect of the Mt. Gox scandal [on Bitcoin credibility in Japan]," JCBA Director General Shinobu Oguchi told MLex today. "Or it can prove how resilient cryptocurrencies are, if its frontrunner can overcome its biggest crisis yet."

Oguchi said that although tech-based associations existed elsewhere and individual exchanges were taking similar precautions, he was not aware of any industry-wide decision on the "distribution/user side" of cryptocurrencies. The JCBA and its members' multilateral decision was prompted by the sense of a need to take proactive measures to shield their clients from an impending crisis, as legal revisions put exchanges under the watch of Japan's Financial Services Agency.

From April 1, exchanges had until the end of September to register with the FSA. As of June 30, none had been licensed.

The lack of oversight and volatility make cryptocurrency trading volumes virtually impossible to measure by country. According to Coinmarket.com, yen/Bitcoin trading volumes appear to have fallen from a high in May, when they topped US and Chinese trading. On the top 20 markets by trading volume in the last 24 hours, Bitcoin trade totaled about $310 million in US markets and $120 million in China. Trading was worth $60 million in Japan.

However, some put Japan's Bitcoin trading volumes at top of the global league table if derivatives are also considered. Oguchi said that Bitcoin traders, while becoming more mainstream, still largely comprised forex traders, who are accustomed to market volatility.

User reaction to the latest developments had been muted, Oguchi said, with the JCBA having received just a handful of inquiries on the matter since its announcement yesterday.