Does Coinbase Have What It Takes To Succeed In Japan's Crypto Market?

August 26, 2021 04:00 PM
Crypto Story of the Day

Crypto Story of the Day




The crypto market was largely unchanged this morning. BTC and ETH spot volumes are above their 30-day average.

Crypto Story of the Day

Last week, Coinbase announced it will expand operations into Japan and is partnering with Mitsubishi UFJ Financial Group for the effort. We look into the state of crypto in Japan and the competitive landscape.

Since its 2012 inception, Coinbase has expanded to over 100 jurisdictions globally. In 2018, the company announced it was opening offices in Japan, hiring former Morgan Stanley banker Nao Kitazawa to lead the subsidiary and pursue compliance with local regulators. In June of this year, the firm received a license to operate in Japan from the Financial Services Agency (FSA).

Coinbase will start with retail services, offering trading for BTC, BCH, ETH, XLM, and LTC. The company also said it plans to launch more products in the future, including “advanced trading”— referring to its Coinbase Pro trading platform— and services for institutions. 

The expansion into Japan also included a partnership with Tokyo-based Mitsubishi UFJ Financial Group (MUFG). According to the Financial Times, MUFG serves 34 million customers in Japan who will be able to transfer funds between Coinbase and their bank accounts as a part of the collaboration. Coinbase will join 30 institutions with a license to operate as “Crypto-asset Exchange Service Providers” under the FSA’s authority. 

Following the Mt. Gox hack in 2014, the FSA saw the need for a regulatory framework for cryptocurrencies and granted its first licenses to 11 exchanges in 2017. In 2018, the largest exchange at that time, Coincheck, suffered a hack resulting in roughly USD 500 million worth of lost NEM (XEM) coins. Coincheck, however, didn’t collapse and still operates as a licensed crypto exchange. 

Last week, Liquid exchange announced that “warm wallets” had been compromised resulting in an estimated USD 97 million of lost funds according to blockchain analytics firm Elliptic. Liquid resumed services to customers on Tuesday this week and reported that no customer’s funds or data were impacted during the attack. 

Other notable firms operating in Japan with a license from the FSA include Kraken’s Payward Asia, BitFlyer, Bitpoint, OKCoin, Crypto Garage, LVC, and Zaif. 

Given the fragmented nature of crypto exchanges operating in Japan, it’s unclear how Coinbase will succeed in solidifying its position in the market. With exchanges offering a commoditized service, organic customer acquisition may depend on Coinbase’s ability to offer new products and services beyond the 5 tokens it plans to initially list. 

In comparison, Coincheck currently lists the most tokens on its exchange, 17 in total, among Japanese-licensed crypto exchanges. In North America, Coinbase lists almost 90 tokens.

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