Japan Is Rapidly Emerging As A Global Leader In Compliant Crypto Payments
Japan is often hailed as one of the most forward-thinking nations in the crypto industry, with its government taking a very positive stance on the potential of concepts such as Web3.
The country was also one of the first in the world to embrace crypto payments when, in 2017, it announced that stores could accept Bitcoin as payment. That came just a year after Japan became one of the first countries in the world to develop a regulatory framework for crypto.
While Japan stopped short of recognizing Bitcoin as a legal tender, its government has emerged as one of the most progressive in terms of the Web3 industry. Last year, the Liberal Democratic Party, the largest political party in Japan, unveiled its “Japan 2023 Web3 Whitepaper”, which eased the regulatory burden on crypto projects and encouraged development in several aspects of the industry, notably NFTs and blockchain games.
This progressive attitude has resulted in increased adoption of cryptocurrency payments in Japan, and a growing number of high-profile retailers and businesses are willing to accept crypto as an alternative to traditional fiat.
One of the first to do so was the department store chain Marui, which said in 2017 it had partnered with the crypto exchange platform Bitflyer to accept Bitcoin as payment in 31 of its stores nationwide. Marui’s decision led to a host of other Japanese retailers making similar moves. For instance, Japan’s largest consumer electronics retailer Yamada Denki said in 2018 it had also partnered with Bitflyer to accept Bitcoin at two of its stores in Tokyo, as part of a trial run. The company later expanded this policy to all of its stores across the country.
Ever since then, the number of Japanese merchants willing to embrace Bitcoin has increased steadily, albeit slowly. One of the latest to take the plunge is the Japanese e-commerce giant Mercari, which said in January it will accept Bitcoin as a payment method in its popular flea market app. At the time, Mercari said it is catering to Japan’s growing demographic of digitally-savvy consumers, and that the move reflects its ongoing commitment to innovation and customer convenience.
Barriers Still Exist
With crypto payments becoming more widespread, Japan is often cited as being one of the most crypto friendly nations in the world, but it is still cautious in many ways. For instance, it has some of the toughest regulations in the world for crypto-asset exchange services providers, which must register as a corporation, or establish a Japanese office and obtain a license if they are an overseas company. The country also has strict laws on the capital requirements for crypto exchanges.
Japan has also clamped down on the use of stablecoins, saying that only banks and registered financial institutions are legally able to issue them. The rules require that these assets must be kept inside Japan and that issuers are fully invested in Japan’s domestic banking industry.
In addition, Japan has slapped some heavy taxes on the crypto industry. Cryptocurrencies are legally classified as “miscellaneous income” and are subject to an effective tax rate of 55%, which is prohibitively high for activities such as trading.
Innovating Within The Rules
Despite these restrictions, several innovative startups have emerged to get around these rules, making it simple for consumers and businesses alike to adopt crypto payments in a compliant way, without falling foul of the rules.
For instance, Slash has created a Web3 payments app that enables transactions in more than 1,400 cryptocurrencies, and it has been adopted by a growing number of Web3 services, e-commerce websites and physical stores. It’s taking advantage of the broader trend towards cashless payments that is spreading like wildfire throughout Japan. The Slash app is similar in some ways to PayPayl or Stripe, and can be integrated via an API into websites, or accepted in stores using QR codes.
Slash explains that it was created to realize a “secure and smooth payment experience” for crypto holders, and it gets around Japan’s restrictions by only facilitating crypto-to-crypto swaps. By ensuring that its users never liquidate their crypto for fiat, it gets around the tough taxation policy that has prevented others from embracing digital assets.
The project launched in 2022 after securing $1.5 million in seed funding and has partnered with institutions such as SoftBank and Zaif to build smart contract-based payment services and integration with Bybit’s Japanese exchange platform. To date, its user base has grown to more than 3,000 merchants and has facilitated total transactions worth more than $10 million by February 2024, showcasing the strong demand for compliant crypto payments.
Slash is likely to grow its presence later this year as it has plans to roll out a credit card for its users, which will be linked to their digital wallets, enabling it to support crypto payments in many more retail stores across Japan.
Leading The Way In Crypto Payments
Virtually every country today is grappling with the question of how to regulate crypto, and they have discovered that creating sensible regulations that protect consumers, without stifling innovation, is an extremely delicate balancing act.
It remains to be seen if Japan has gotten it right, but so far it seems to be on the right track, as it remains at the forefront of crypto innovation. As crypto payment providers like Slash grow their market presence, Japan could well emerge as a showcase for how to integrate crypto into the traditional financial system and broader society without upsetting the applecart.
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