The recent slump in cryptocurrency markets has translated to bad news for its investors and enthusiasts all over the world. Except in two countries. Even as governments and corporations the world over are shutting the door on coins and associated products, Japan and South Korea hold out hope for their inclusion into the existing financial ecosystem. Indeed, the two countries are likely to figure prominently in any account of a comprehensive history of cryptocurrencies because they have played an outsized and pioneering role in developing the ecosystem for digital coins.
Retail investors there have embraced cryptocurrencies with fervor. The Japanese yen and South Korean won are among the most-traded currencies on the world’s cryptocurrency exchanges. In recent years, South Korean investors have propped up notable cryptocurrencies, such as ethereum and ripple, with their “Kimchi Premium."
The first has to do with innovation in financial technology. Blockchain, the underlying technology behind cryptocurrencies, is a game-changer for banking. Among other things, it enables cashless transactions and cross-border money transfers at little to no cost. With its primarily cash-based economy, Japan has lagged other, developed countries in innovating within its finance ecosystem. The situation is not much different in South Korea. Cryptocurrency technology will help both countries catch up quickly with neighboring China, which has surpassed them in transaction value involving financial technology.
There are solid financial reasons for Japan to support cryptocurrencies. According to Takashu Shiono, an economist with Credit Suisse in Tokyo, the country could mop up as much as $9.2 billion in tax revenues from cryptocurrency business, including capital gains from individual investors and corporations. They may also contribute as much as 0.3% to Japan’s GDP. That is not a figure to sniff at, when you consider that the Asian nation has regularly recorded growth figures of between 1% and 1.5% in recent times. South Korea has similar plans and plans to tax cryptocurrency trades.