Are virtual currencies and blockchains really the biggest revolution since the Internet?
Virtual currencies are currently attracting a lot of attention. Is this merely a passing fad, or is it an innovative currency that could become the standard for a new era? At the New Economy Summit (NEST) 2018, under the theme of “Japan Ahead: Gathering the Power to Lead Japan,” Oscar Miel, Managing Partner of Rakuten Fintech Fund and Executive Officer of Rakuten, acted as moderator, and QUOINE CEO Kariya Kayamori and Argon Group Managing Director Elliot Han took to the stage. Discussions were held on the themes of “virtual currencies,” “blockchain,” and “ICOs (Initial Coin Offerings).”
A passing fad? The current state of cryptocurrencies
First, Oscar Miel, an executive officer at Rakuten, explained the current situation regarding the size of the virtual currency market. The total market capitalization of virtual currencies is on track to exceed $260 billion as of April 2018, which exceeds the market capitalization of major tech companies. It has increased rapidly over the past year, growing by about 14 times.
Another recent trend is the active use of “Initial Coin Offerings (ICOs),” a new method of fundraising using virtual currencies. As of April 2018, more than 1,500 ICOs have been carried out in more than 20 industries, raising more than $5 billion.
Miel explained, “Japan is becoming a global leader in virtual currency trading, with about half of all Bitcoin transactions taking place there. There are also movements such as the launch of a self-regulatory organization by exchange operators following the Coincheck fraudulent leak incident, and efforts are being made to make virtual currency transactions safer.” According
to Miel, Japan, Switzerland, Bermuda, Singapore, and other virtual currency-friendly regions tend to see a decline in currency prices when regulations are introduced, including in the United States, parts of Europe, and South Korea.
Are cryptocurrencies a “zero-sum game”?
Miel asked the two speakers, QUOINE’s Kayamori Kariya and Argon Group’s Elliot Han, “Some people think of virtual currencies as a ‘zero-sum game’, like gambling. Can we consider virtual currencies as an asset class?” Kayamori responded,
”I consider virtual currencies to be an asset class. Take Bitcoin for example, its value rose sharply in 2017, then fell sharply. I think this was a necessary pullback for virtual currencies. Virtual currencies are similar to gold (bullion) and can be a long-term asset class. Its value as an asset class has only just begun to emerge. Now is the time to buy.” Eric also expressed his view that “It is too early to judge the value of virtual currencies. I think that each individual has their own view, but I also think that now is a good time to participate. There are growing pains, but I see it as an asset class.” He
also said, “Virtual currencies also have a speculative aspect, but it will improve over time as they eliminate fraudulent parts and impose regulations. It is better to think that we are at the stage where something very innovative is about to be born.”
In response to his words, Miel asked, “Will government intervention and regulations be a headwind? Is there a possibility that they will have a negative impact?” Elliott replied,
”Regulation itself is not something that suppresses innovation. It is there to protect many investors.” Kayamori commented, “On a global scale, I don’t think there is anything that can stop virtual currencies. At their core is the decentralized blockchain. You could say that Bitcoin was launched in 2009 as an antithesis to the global financial crisis. However, now that it has become mainstream in finance, it no longer plays that role.”
Blockchain enters a new era
Next, Miel spoke on the theme of “blockchain.” He explained, “We are currently in the stage of ‘blockchain 3.0.'” According
to Miel, from “blockchain 1.0,” when Bitcoin was born as a decentralized, decentralized virtual currency, complex technologies such as Ethereum, programmable blockchains, and “smart contracts” have emerged (blockchain 2.0). Currently, we are at the stage (blockchain 3.0) where companies can use these technologies to provide new business models and services. Blockchain has evolved in a short period of time. Blockchain has begun to be
applied from “public blockchains” to “enterprise (private) blockchains” developed by companies. In the field of remittance transactions, existing financial institutions are conducting research and development to utilize blockchain as the foundation. Major financial institutions are focusing on this, such as setting up research institutes within their own companies.
Regarding the difference between public blockchains and enterprise blockchains, Miel explained, “It’s the difference between the Internet and an intranet.” In a public blockchain where anyone can participate openly, the speed will be slowed down if all participants are invited. Enterprise blockchains can solve such problems.