- Binance re-entered Japan by buying and rebranding a local exchange.
- The company was previously warned by regulators about operating in the country without permission.
- The move comes as Japan turns its attention to blockchain with an ongoing national web3 strategy.
- But users must onboard officially with renewed KYC checks, meaning growth may stall in the short term.
Even as Binance withdraws from Europe and other markets, the embattled crypto exchange has managed to regain access to Japan, according to a tweet from CEO and founder Changpeng Zhao..
This week, Binance Japan started signing up customers and plans to start switching Japanese users from the global exchange to the Japan unit on August 14.
Regulators’ warning
Regulators in Japan warned Binance in 2018 and again in 2021 that it was operating without permission. Similar warnings were issued to other firms including Bybit.
In 2022, Binance Japan sought a permit to re-enter the market, according to a report in Bloomberg News. And last November, it acquired Sakura Exchange BitCoin (SEBC), which is based in Osaka and was already registered with regulators. SEBC wound down operations in late May and relaunched as Binance Japan on August 1.
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The development marks a fresh opportunity for Binance to do business in the world’s third biggest economy. Long known for taking a hard line on crypto, Japan’s approach towards crypto and web3 appears to be thawing.
As for Binance, it is making an effort to comply with Japan’s Financial Services Agency regulations at the same time it runs into turbulence with regulators in other nations. Binance declined to comment for this story.
Challenges in Japan
Earlier this year, investors withdrew $4 billion from the exchange as it shut down operations in the Netherlands, Belgium, and Canada, withdrew its applications for operations in Austria, and was rejected by German officials.
And in June, the US Securities and Exchange Commission filed 13 charges against the company and Zhao for allegedly operating an unlicensed exchange and broker dealer.
Binance will still face challenges in Japan. Not officially running in the country hasn’t stopped it from acquiring users there, even if it has said it does not operate there or actively solicit them.
Those users will now have to switch to Binance Japan and go through the know-your-customer checks again. Daiki Moriyama, director of blockchain company Oasys, believes this could result in a temporary reduction of Binance’s user base in Japan.
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Japan is intent on not missing the growth of web3 the same way it largely missed the web2 surge in the 2000s, according to Sota Watanabe, the founder of Astar Network, a popular Japanese blockchain network.
Many Japanese business leaders regret not developing their own versions of Google, Meta, or Tencent as broadband scaled 20 years ago. But while fresh competition from foreign firms such as Binance may provide users with more choices, their entry augurs a repeat of the web2 scenario.
New form of capitalism
Watanabe frets local exchanges might face challenges competing with the likes of Binance.
“The entry of foreign firms with powerful capital into the market is what we saw in the web2 space,” he told DL News.
He said that if local exchanges struggle, it could reflect a failure of government policy to support domestic platforms.
The fear of missing out again is part of what is driving Japan’s government to now actively embrace Web3. In a keynote speech at WebX in Tokyo last month, Prime Minister Fumio Kishida called web3 “part of the new form of capitalism.”
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Japanese firms have been experimenting with blockchain technology, including gaming giants such as Square Enix and Bandai Namco. The latter launched an NFT game earlier this week with Oasys.
Tax policy is an obstacle. There are high taxes on digital assets — including tokens that haven’t been sold. The Japan Blockchain Association is calling for the government to change these policies.
Binance’s presence
Yet Moriyama also cautions against trying to read too much into regulatory trends based on Binance. After all, its return is the result of an acquisition of an already licenced company, not Binance itself being welcomed by regulators.
“Binance’s decision to penetrate the Japanese market likely reflects the firm’s faith in Japan’s advanced regulatory framework, not necessarily an altered attitude among regulators,” added Moriyama. “Nevertheless, Binance’s presence could influence the Japanese regulatory landscape in the medium term, as the industry continues to evolve.”
Got a story about crypto regulation in Asia or any other tips? Contact me at callan@dlnews.com
