The February 2014 collapse
of Tokyo-based bitcoin exchange Mt. Gox was, for more than 24,000
investors around the world, a traumatic event. It also ushered in a
two-year crypto bear market that saw the price of a single bitcoin
plunge from a peak of $1,200 to a low of around $200 before the torrid
bull market of the present day began. And as the bankruptcy and legal
issues surrounding the collapse continue to wend through the Japanese
legal system, none of these investors have received a single crypto cent
of remuneration – despite the ballooning valuation of the exchange’s
remaining assets.
Many market observers believe that one of the biggest risks to the
current rally would be a similar incident unfolding across another major
exchange like Bitfinex or CoinBase’s GDAX.
So in a move that could go a long way toward legitimizing the burgeoning crypto market,
Japanese
banking behemoth Mitsubishi UFJ Financial Group which is Japan's
largest financial group and the world's second largest bank holding
company – through its trust and banking unit – is preparing to launch a
service that will allow individual investors to secure their bitcoins in
the event an exchange should fail again, according to
Nikkei Asia Review.
MUFG isn't the only major global bank seeking to build up its cryptocurrency franchise:
Goldman Sachs is
reportedly in the process of launching a crypto trading desk. Of
course, as observed recerntly, Japan is one of bitcoin’s biggest
markets, and its largest exchange, Bitflyer, accounts for nearly 40% of
global exchange-based trading.
MFUG’s new trust service would help mitigate what has, in the past, proven to be one of the biggest threats to the crypto market
. It will also help Japanese regulators cement their position at the vanguard of crypto’s integration with traditional markets.
Mitsubishi
UFJ Trust and Banking is preparing a scheme for protecting holders of
cryptocurrencies if the exchanges they use fail - a risk that veteran fans here know all too well.
This highlights how Japan's finance industry seeks to make the most
of the opportunities associated with virtual currencies, which the
country has taken to in a big way, accounting for around 40% of global
bitcoin trading.
Japan was also the epicenter of one of the digital currency's biggest
shocks -- the 2014 collapse of Mt. Gox, the largest bitcoin exchange at
the time.
Mitsubishi UFJ Trust will offer a way to keep exchange customers'
cryptocurrency holdings separate from the entrusting exchange's assets. This
will make it the first trust arrangement of its kind in the world,
according to the Mitsubishi UFJ Financial Group member, which recently
applied for patent protection.
Per Nikkei, the service could launch as early as April, when Japan's
Financial Services Agency is expected to recognize cryptocurrencies as
an asset that can be placed in trust, like real estate or securities.
While the market value of major cryptocurrencies has ballooned to
$300 billion, bitcoin and its peers have remained remain decentralized
creations without an oversight body like a central bank – a core
component of their appeal. But as the usage and valuation of digital
currencies grows, these exchanges, which are often overwhelmed and
under-staffed by the flurry of new accounts, they’re increasingly
becoming targets for state-sponsored hackers like the North Korea linked
Lazarus Group.
As Nikkei explains, Mitsubishi UFJ Trust will maintain the same records as its exchange clients.
In
the event that the exchange operator fails to safeguard its customers’
assets, Mitsubishi UFJ will use these records to compensate investors
for their losses.
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| This picture is a lie. It's to convince you subliminally that you are investing in something as valuable and solid as GOLD. You are INVESTING IN NOTHING, NOT EVEN CURRENCY. It's a ledger with ones and zeros and when the server is off, so is your investment. You must understand this. |
Of course, this service won’t protect customers from violent plunges
in the valuation of bitcoin, like the selloff that occurred
over the weekend during the runup to the Christmas holiday.
Using an arrangement like Mitsubishi UFJ Trust's would entail a fee that would be shouldered by individual investors. But
"customers will feel peace of mind knowing that a trust bank is managing their assets,"
said CEO Noriyuki Hirosue of Tokyo-based exchange Bitbank. After all,
the big banks have never violated their fiduciary duty to their clients –
therefore, they’re implicitly more trustworthy than crypto startups
with few resources and little to no track records.
To
use the service, exchange customers will opt in when they start
trading. Mitsubishi UFJ Trust will monitor the accounts of those who do
for suspicious activity and examine pending transactions in detail as
needed. A late-night sale of a huge amount of bitcoins, for
instance, would get flagged for inspection instead of being processed
immediately.
While regulators in the US have expressed skepticism about digital
currencies, Japan established itself as a leader in building a
regulatory framework when nearly two years ago, it passed a law clearing
the way for financial institutions to become involved in the crypto
market.
The Japanese recognize the adoption of cryptocurrencies and
blockchain technologies as a competitive advantage, and they're right.
The FSA began registering cryptocurrency exchanges in earnest this past
autumn.
Offering this service will help establish one of Japan’s largest
financial institutions as a key player in an increasingly contested
global market, which has seen a surge of institutional interest in the
trading of cryptocurrencies in recent months.
source ZH
