Table Speech

Looking into the Future of Cryptocurrencies

May 30, 2018

Mr. Taizen Okuyama
Money Partners Group Co., Ltd.

 The hacking attack on Coincheck Inc. at the end of this January have created widespread anxieties about cryptocurrencies. To restore public confidence through comprehensive rules and regulations that ensure investor protection and internal regulatory control, the 16 registered cryptocurrency exchange operators have joined forces and established the “Japan Cryptocurrency Exchange Association (JCEA)” on April 23rd. I serve as Chairman of this self-regulatory body supervised by the Financial Services Agency. I understand not a few people are skeptical about cryptocurrencies because of its naming and tend to think it’s just a money game. Today, I will try to explain the fundamental reasons why cryptocurrencies have come to attract much attention.

 It was in 1997 when the Internet and information technology started to spread in a larger scale here in Japan. In 20 years, we have witnessed epoch-making development and widespread use of the Internet. Smartphones have replaced mobile phones and for most people, not a single day passes by without making access to the Internet.

 We are now entering an industrial revolution, or technological singularity to be more precise. A communication revolution has triggered an information explosion and changed our lifestyle dramatically. Today, IT2.0 has become a topical issue. It allows data to be stored on the Internet. It is predicted that all the data currently kept in servers or hard drives of personal computers will come to be stored on the Internet by 2030. To ensure data security, you put a key, encrypt the data and disperse them. You can store an unlimited amount of data and access them anytime, anywhere.

 Now, let me ask how we confirm our possession of property. For example, we cannot physically put down our name on a real estate or land. Instead, we record registration of ownership to confirm our possession. Previously it was done in written form such as a title deed. Today, it comes in a digital form saved on a database. Even when you have not actually seen 100 million yen in cash saved in your bank account, the data stored on the bank database can prove your ownership of such property. When the world becomes highly digitalized, data will come to replace physical property. As technology gets more advanced to allow easy exchange of such data on the Internet, it will facilitate transactions of diversified values other than legal currencies. Data (property) becomes synonymous with methods of transaction and payment.

 I can safely say that Bitcoin was the first successful case proving the superior technical performance of the public blockchain, which is an open-source data infrastructure where anyone can store data on the Internet platform without permission. Alternatively, a private blockchain is a permissioned data storage service provided by individual private companies such as Apple Inc. and Google Inc. To maintain and utilize such public data infrastructure, we need to reward the “miners” who validate new transactions and record them on the global ledger as well as charge transaction fees. Cryptocurrencies can be a useful means to settle transactions that extend beyond national boundaries. Digital currency is the most advanced form of data. If you want to exchange or utilize data within the public blockchain network communities, you must purchase cryptocurrencies. When you wish to convert a cryptocurrency into to real cash, you go through the cryptocurrency exchange operators. I find it disappointing that currently, cryptocurrencies tend to be a target of money games and attract waves of speculative money. The latest incident of massive theft has further stigmatized it as a risky and unsafe gambling.

 I believe in the future of digital currencies and data infrastructure. Cryptocurrencies will take on an even more important role to ensure the smooth operation of the public data infrastructure. I want to share the two buzzwords related to cryptocurrencies. One is “decentralized” which symbolizes the direction the digital society is heading toward since the information explosion. Digitalization has enhanced diversity and greater tolerance for originality. I believe the data revolution will further accelerate this trend. The other word is “trustless” meaning “all-out trustworthiness without needing to trust in the parties you transact with”. It is a high degree of trust and confidence that blockchain technologies and future digital society aim to achieve to facilitate smooth data and money transfers and property management based on robust network.

 Utilization of computers and the Internet will revolutionize over the coming 10 to 20 years. I want to emphasize that the blockchain is a technological singularity and is as impactful as the invention of steam engines in the late 18th century. Cryptocurrencies will play an essential role to fuel this innovative technology. I understand it is the mission and challenge for exchange operators including myself to gain the confidence of users and make cryptocurrencies a useful and trustworthy tool in the near future.