Kei Oda is the head of Japan and the Asia-Pacific region for Quantstamp, a Web3 security firm that audits smart contracts and develops blockchain security solutions.
Kei spent 16 years trading bonds at Goldman Sachs before stumbling into cryptocurrencies out of boredom. He tells Magazine he was induced by the ability to trade Bitcoin and other assets around the clock.
He has since fallen down the rabbit hole, even finding a job in the industry.
1. How did you get involved in crypto?
So, I was actually a bond trader for 16 years before joining crypto.
You know, we used to talk about Bitcoin when I was still trading bonds. I didn’t really understand it or believe in it, to be honest, but when I left my job in 2016 and tried to get into the startup space, what dawned on me once I left was that, having been a trader, you do have a long-term focus, but you also are very, very short-term in terms of how you trade, what you do day to day, minute to minute, and what ended up happening was, I would get bored very easily.
Essentially, my attention span became like a goldfish, and that was what working in finance kind of did to me. And so, I started trading Bitcoin.
Initially, it was simply to pass the time. And then, once I started researching Bitcoin, obviously, I thought the value proposition was extremely compelling.
And as part of that journey, I of course fell down the rabbit hole and started looking at crypto in general and specific assets like Ethereum, and it just sounded like a crazy, crazy proposition. You know, if it succeeds, obviously we’re talking about something that could be game-changing.
2. What do you think of the current Japanese crypto ecosystem?
I think that Japan has a pretty vibrant ecosystem, especially right now. It’s taken a while, but if you look at the trajectory of what Japan has gone through as a whole (the Mt.Gox and CoinCheck hacks, etc.), it has become very progressive.
In one sense, you know, allowing Bitcoin to be kind of used as currency, not obviously as an official currency or government currency, but it is an accepted payment method, and it’s actually legal to use it.
I think another kind of sector that seems to be quite exciting, at least for Japanese financial firms, is security tokens. I think that’s something that people are looking at. Security tokens globally — I don’t really hear that much about, [but] there are quite a few companies looking at them here in Japan.
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It almost feels like the Japanese crypto blockchain ecosystem has broken off a little bit from the rest of the world, or at least the cycles seem to be a little bit displaced in the sense that we’re starting to see very good interest and decent activity from big companies in Japan. Whereas I think that that probably happened a little bit earlier in other markets and has now kind of subsided.
3. What has held the Japanese crypto scene back?
I think at the bottom of it all is taxation. Taxation is still not very friendly here in Japan.
What the old regulation used to be is that if your Japanese startup issued a token here in Japan and you sold half of it to Japanese investors or the Japanese community, then you would have to pay tax on the revenue that you realized by selling tokens. But you would also have to pay tax on the 50% that you hadn’t sold.
Related: An overview of the cryptocurrency regulations in Japan
It’s even worse for personal taxes. In Japan, profits on crypto trading are taxed as extra-ordinary income, which can be as much as 55%. It’s not super friendly.
Now, if you compare that to Singapore, the basic tax rate is much, much lower at around 20% or something. Hong Kong, I think, is something similar. Dubai obviously has zero income tax. So, you’re talking about a pretty big difference financially for startup founders and entrepreneurs.
4. Do you think more companies will start setting up in Japan instead of opting for other Asian hubs?
The Japanese government is trying to be very progressive and forward-thinking about Web3.
They’re trying to be very active in getting talent to stay in Japan and also to come to Japan.
For example, the government is planning digital nomad visas. And I think that is going to be great for people who earn in other currencies and come to Japan, just because the yen has become so much more attractive (weakening against the United States dollar).
Japan is also attractive because there is a big market here, and there is a big market size that startups can capture here.
The Japanese crypto scene is quite active. However, what I find is that, when you go to a Japanese meet-up, there is a long presentation that you have to sit through. And at the end, they give you five to 10 minutes to try and network.
But you know — excuse my language — it’s kind of a shitshow.
So, what I did was help to create an event [Tokyo Blockchain Night] where there’s no presentation — no one’s trying to sell anything.
It’s simply like-minded people being able to have a drink and talk about crypto and look for investors, engineers, etc., or just make friends.
I think it’s something that helps people and goes along with the whole kind of ethos we have at Quantstamp, which is that we help people and pay it forward, and hopefully, something comes back to us.
6. How did contagion from collapses like FTX impact the Japanese market?
The way FTX essentially blew up is kind of interesting in that FTX had a Japanese subsidiary; they bought a Japanese exchange called Liquid.
And because the regulations around asset custody in Japan were much stricter, FTX Japan wasn’t able to commingle funds or anything like that. So, actually, the Japanese entity was fully liquid and solvent. To the point where, if you were a Japanese customer of FTX, you essentially either have or will get all of your money back.
Whereas if you’re a client of FTX International, I don’t know what the update is there, but it’s not looking that promising.
I think the Japanese regulations that came in after the CoinCheck hack were probably much more strict than other jurisdictions; however, as a result of that, we’re now seeing an uptick in Japanese activity, to the point where the MUFG, the world’s biggest banking conglomerate in Japan, is going to launch stablecoins.
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Brian Quarmby discovered crypto in 2013 and instantly fell in love with the idea of decentralization. Brian has since lived and worked Asia and returned to Melbourne in late 2019. Brian is a lover of sport and art and is bullish on the potential for NFTs to transform artists lives in the near future.