With the robust performance of the decentralised Bitcoin digital currency, traded by exchages like Quoine, reaching new heights as it entered 2017, outperforming a number of traditional fiat currencies, it has also generated discussion of its potential role in a cashless future. The performance of bitcoin also corresponds to the increased focus on the blockchain technology – essentially a distributed digital ledger – that underlies the virtual currency and its derivatives like Ethereum and Litecoin.
An IMF study observes that virtual currency schemes are essentially private sector systems help peer-to-peer (P2P) exchange bypassing traditional central clearinghouse and offer potential benefits through their dis-intermediating effect which includes greater speed and efficiency in making payments and transfers. Ultimately, this promotes financial inclusion.
Virtual currencies also pose significant risks as potential vehicles for money laundering, terrorist financing, tax evasion and fraud, with larger risks to financial stability as they gain traction and mature.
Quoine claims to be among the largest blockchain/cryptocurrency companies worldwide, and the leading exchange in Asia, excluding China, with a reported transaction $600 million to $900 million worth of transactions per month. According to an email exchange with Kayamori, the exchange is set to surpass $1.5 billion for January 2017.
Quoine successfully raised a $20 million funding round in 2016 and transferred its headquarters from Singapore to Tokyo, though continues to maintain an office in Singapore. According to Kayamori, the exchange plans to expand its offerings into remittance, financial services and payments, an area where virtual currencies are already having an impact.
What’s the impact of Japan’s legalisation of virtual currencies on the industry terrain?
It’s the best thing that could happen. Normally, most people try to avoid the hassle of regulations but for bitcoin s a hassle but for Bitcoin and other virtual currencies, regulating the currency is about bringing transparency and clarity to the transaction process.
If you are a registered exchange in Japan, now you can officially work with customers on trading cryptocurrencies in an appropriate way. It’s the first global, national movement in Japan and I think it will have a positive ripple effect throughout Asia.
What are the prospects for a regional digital currency for Southeast Asia, in light of China’s development of its own digital currency?
Well for me, Bitcoin itself can be used regionally, it could be nationally, it could be used globally. So I don’t think there’s a need for another regional cryptocurrency. That said, there’s a lot of movement around dedicated cryptocurrencies.
It could be a corporate currency, it could be a loyalty point currency, it could be a gold-backed cryptocurrency and it could be a national one as well right? In regards to China coming up with their own, I’m an advocate of any country or a large multinational corporate formulating their own digital currency. I think the possibilities are infinite.
What’s your take on the debate about separating the blockchain from bitcoin?
So that’s an interesting question. It’s been going on for maybe a year and a half…two years, while when the bitcoin price was over a thousand dollars, people were talking about bitcoin. It was the internet of money. It was the digital currency, it was the best thing since sliced bread. Then it became blockchain and now people don’t even say its blockchain! People say its distributor ledger technology.
To me they’re essentially the same thing. We believe in the open source, permissionless, bitcoin/blockchain or Ethereum blockchain or any of these names. To me, it’s a token based blockchain which has enormous opportunities. There will be financial institutions or governments who want to have a permission-based…maybe tokenless blockchain and that’s perfectly ok.
There’s going to be many opportunities for many blockchain. We just advocate and we support the open, permission-less, token-based blockchain. And we also – from our exchange perspective – we handle cryptocurrencies that are over $500 million in terms of market cap. So it’s essentially bitcoin, ethereum and everything else.
But I think that regardless of this debate or discussion, what it does is to bring a lot of interest into this whole ecosystem which is a positive step. But I think, I look at it very similar to the Internet evolution where when the Internet initially started, people were talking about: I want to provide online services to our customers but the Internet is so dangerous right? It has flaws.
It didn’t have enough IP address, it was slow, there was no security. We don’t even have those discussions right now. The Internet has evolved. People don’t want to create a new Internet. People don’t want to create a permission based Internet and I think it’s going to be similar with the blockchain as well.
What do you see as the applications for cryptocurrencies in private capital markets? What’s your take on Second Market being acquired by Nasdaq?
So we’re talking with a few providers that are evaluating cryptocurrencies where they do provide dividends. So there’s a lot of opportunities for these cryptocurrencies and for those there’s going to be secondary markets for that so again, I don’t think it has anything to do with SecondMarket being acquired by Nasdaq.
I think Nasdaq launched a platform for private capital involving cryptocurrencies – Linq – and in aggregate all these movements are very good and it’s going to help the ecosystem in a very positive way.
Do you see a demand for cryptocurrency ETFs in the Asia Pacific?
Totally. If regulation allows, we would like to explore having a bitcoin ETF or Ethereum ETF, or maybe a fund that is a combination of three or more different cryptocurrencies. When you look at the market in 2015, Bitcoin from a currency perspective was the one that appreciated the most against the US dollar. It was also the best performing currency for 2016.
From that perspective – and when you look at the whole entirety of bitcoin since 2009 and 201 – its appreciated every year other than 2014. So to me, from a view that considers long-term asset appreciation, it’s an opportunity.
Where do you see the bitcoin and cryptocurrency markets evolving from now until 2021?
So it’s about how you define the market opportunity. If you look at transaction volume, I think it’s going to be in the range of hundred of billions of dollars or trillions of dollars.
So in terms of market capitalisation, when you define it at $2 billion or $20 billion – I don’t know how you’ll define the performance – then I can tel you that the transaction volume, especially from an exchange perspective, is going to be so much bigger than that. I think it’s going to be trillions when you look at it from a transaction volume perspective. There’s going to be multi-billion dollar blockchain cryptocurrency exchanges that are going to be acquired or go public.
What’s your take on cryptocurrency funding, given platforms like Bitbond? How does it apply to the Indo-Asia Pacific region?
I think there’s an opportunity. I think in general, when discussing securitising assets through cryptocurrency, there’s a big opportunity. For crowdfunding though I haven’t studied the market enough.
Regardless of it becoming a cryptocurrency or whether its fiat currency-based, I don’t know how big the crowdfunding market itself is. But obviously, for being a means of delivering investment dollars, cryptocurrency is a very good method. And putting the disclosures of all the agreements on the blockchain, makes it more transparent and makes it easy to cut out excess middle man intermediaries to cut cost.
What advice would you offer to entrepreneurs, given your own corporate background with Softbank and the JV with Singtel?
So I look at it more from a Softbank perspective. The JV with Singtel was a lot of good learning but it also had its own unique challenges; working between two large global companies. But stepping back and from a Softbank perspective, where I have the opportunity to work closely with the founder of Softbank – Masayoshi Son – was one of the most wonderful experiences that I had.
And the biggest lessons learnt to be an entrepreneur is to always think big, and that the opportunity and the potential is limitless. It’s about thinking outside the box, having the right people around you and focusing on growth.
What advice would you give to your younger self – the one that started on this professional journey?
Well so the thing is, this was 20 something years ago. The startup ecosystem wasn’t there. So the most important thing is joining an institution or a company or a firm that will always challenge you, test your capabilities and present you with opportunities.
So if I were a new grad now, I would go to one of the most challenging environments that will always stretch my mind and the difference between now and then is that its much more technology and product-driven now. So if I were to recommend a new grad now, I would not tell him or her to join a conglomerate like Mitsubishi.
Instead, I’d tell him to join a product-driven technology firm where you can find great co-founders or business partners with whom you can start your own company.Or start something that’s innovative.
Again, think big. Think outside the box. Opportunities are limitless. I took more of a safer route. I went to the largest, the most credible company in Japan and then I went to business school to learn finance and general management and then I joined a venture capital fund. For me now? I’d tell them not to wait too long. If there’s something that you’re passionate, go ahead and do it. The risk and reward is there.
What’s you advice to foreign entrepreneurs looking to enter the fintech scene in Japan?
So now is the right time to enter the fintech pace in Japan. The regulatory restrictions and those are becoming much more easier. It’s a healthy environment. I think the challenge will be not attempting to enter Japan just because it’s a big GDP or a big market.
You want to go to a place because there’s opportunity and there has to a need of your service there. If you’re a foreigner, you need to find a co-founder or partner who is Japanese and can help you with navigating the local market.
But my take is that the growth lies in Asia. Go to markets where there’s a big opportunity. You don’t want to be competing in a mature market where you need to build market share in a segment that may be saturated. You must go to where the next big growth wave is. And to me, that’s emerging markets. And all of that is concentrated in Asia.