Exclusive: Makoto Takemiya of Soramitsu on the State of Affairs in Japan’s Bitcoin and Blockchain Industry
Summer 2017 was hot in every sense of the word. Aside from the drama that resolved with bitcoin hardforking into two, there were several major conferences and other events like Hyperledger Hackfest in Odessa DataArt center. There, renowned speakers shared their experience of work in blockchain projects, and held several coding practice sessions.
The speech by Makoto Takemia, co-founder and CEO of Hyperledger Project member Soramitsu, a Japanese fintech company developing blockchain solutions for identification and management of assets, was amongst the most remarkable and interesting moments of the event.
His speech covered several interesting cases from Japan. Mr. Takemiya also demonstrated Soramitsu’s own projects, most of which employ Hyperledger Iroha.
According to the Hyperledger Project website,
“Hyperledger Iroha is a blockchain platform implementation and one of the Hyperledger projects hosted by The Linux Foundation. Hyperledger Iroha is designed to be simple and easy to incorporate into infrastructural projects requires distributed ledger technology. Hyperledger Iroha features a simple construction; modern, domain-driven C++ design, emphasis on mobile application development and a new, chain-based Byzantine Fault Tolerant consensus algorithm, called Sumeragi. Hyperledger Iroha was initially contributed by Soramitsu, Hitachi, NTT Data and Colu”.
In his exclusive interview with ForkLog, Mr. Takemiya spoke of what Soramitsu is engaged in at the moment, however, it wasn’t the only thing that he covered. It was an opportunity to find out about the current state of affairs in Japan’s blockchain industry straight from the source, and whether the new regulatory framework could be a game changer when it comes to acceptance of new technologies.
In his own words, Makoto Takemiya is amongst bitcoin’s early adopters. Years ago, he was an active user at Bitcointalk (though he preferred to keep his username dark). Our talk inevitably covered those issues as well. However, being a person who knows ins and outs of bitcoin’s ecosystem, Mr. Takemia wasn’t too optimistic.
ForkLog: Hello, will you tell us more about Soramitsu?
Makoto Takemiya: We are a fintech company based in Tokyo and we deal mainly with banks and insurance companies, globally and in Japan. We do things like fintech solutions with blockchain technology, primarily with Hyperledger Iroha which we were initial contributors for. Just to clarify things: we developed Iroha internally and contributed it to Hyperledger Project. We also build mobile applications on top of that.
FL: What kind of applications are you building?
M.T.: We work with an insurance company in Japan on weather derivatives projects, creating contracts on blockchain. Then we also work with the National Bank of Cambodia on building payments system for the country, and it’s also using Hyperledger Iroha.
FL: How did it start with your Cambodia project in the first place? Was it hard to convince people there to start trialing blockchain?
M.T.: They contacted us initially about the project and we talked about all the details, and now we are building the payment system infrastructure for the country. It is based on Hyperledger Iroha which is an open-source project under the Hyperledger umbrella. So it should be very interesting since it’s something that is being deployed on the national scale. I don’t think there are many examples of that, and it’s important for the blockchain industry on the whole.
FL: And surely it’s important to your company as well.
M.T.: Oh yes, it’s very important to Soramitsu. We build our reputation with that and show that we can be trusted. That’s actually one of the big things with the Hyperledger Project and their marketing team. People know that you can trust their data, and data is the core value of applications. So having a strong governance framework is very important.
FL: Do you have plans to expand your business to other countries?
M.T.: Yes, of course, Iroha Hyperledger is very well suited for micropayments. It’s a permissioned ledger, so you can set it up inside a trusted and reliable network in order to do efficient payment processing even on a national scale. We came to Ukraine and spent time travelling and paying for things, and it would be really nice to do this digital. It’ such small amounts that you can’t use Bitcoin which would cost more than the amount you are sending. So, micropayments is one of the use cases, and I also think interbank settlements and DVP (Delivery Versus Payment) can be good use cases.
So we speak about the countries without good infrastructure, obviously, they are our targets, because if you build a new infrastructure you can build something more efficient and more secure than traditional infrastructure. That’s one of the things Cambodia realized. Therefore it could be countries similar to Cambodia and also countries that rely heavily on digital payments, countries like Sweden for instance where people don’t use much cash.
FL: Last year Sweden’s central bank said it was considering the possibility of issuing its own digital currency, the so called eKrona, however, they had a survey on that matter which found that less than 10% of the country’s population supported having this option available in addition to cash.
M.T.: It depends on the country as well. I don’t think digital should be the only option, there should be non-digital options as well. Also proper governance and checks and balances are important in digital currencies. You want a centralized government to control all transactions in the country: it’s not healthy for the economy and your need a little more privacy with your transactions. Blockchain can help build that, where you have rules that even central bank may have to follow. It’s about things like what data you can see, what level of anonymity is there, should it be like Bitcoin where you can see the numbers but don’t see who these people are, or maybe even potentially things like mixing services.
On the other hand, it also prevents criminal activity when you have checks and balances, or some process, if multiple parties agree, where you can use a sort of transaction history, or, perhaps, freeze accounts. That’s important from the society’s standpoint. Money is a very important aspect of our lives and you need some control over it, but it shouldn’t be just one agency saying ‘We want to control all transactions in the country’. That’s a terrible idea.
FL: That’s something you call ‘centralization’, and something digital currencies are supposed to be a recipe against.
M.T.: Well, it’s something that we have right now. No one can stop me physically from giving you cash, you can prevent me from giving the cash: once things move to digital you can prevent transactions automatically, and maybe that’s something that is desirable from the country’s point of view. You need a lot more privacy and you also need some check of authority.
FL: You mentioned Bitcoin saying it’s not too suitable for microtrasactions. Could things change when solutions like Lightning Network are finally implemented?
M.T.: Yeah, potentially. Once countries start issuing digital currencies, Bitcoin will be mostly irrelevant to average person. It’s just my opinion. The nice thing about Bitcoin is how easy you can send money anywhere, it’s a very good user experience when you are able to send money as easy as an e-mail letter. Compare it to credit cards, where you have to put some numbers, your telephone number, then some numbers on the back. But once you start having traditional fiat currencies going digital with very low fees, I don’t think anyone will be using Bitcoin for sending money.
That being said, the main application of Bitcoin right now is not sending money, its main application is speculation. People don’t really use Bitcoin as a currency now.
FL: So what lies ahead for Bitcoin then?
M.T.: It all depends of what decisions that the Core development team and the miners take right now. Bitcoin has come to a certain crossroads and either has to impress with innovations and try to expand the system’s usability, or we just pursue profits. Once things like SegWit are implemented, or maybe there’s block size increase, and the scalability issues are solved, it will have lots of potential. Otherwise there has been surprisingly little innovation in Bitcoin space compared to other projects.
FL: What do you think about the political battle between various camps in Bitcoin then? Some people want bigger blocks, while others insist SegWit is the only way to go.
M.T.: I don’t think it’s a political battle, rather a religious one. But I think there’s nothing wrong with trying new things as long everything is robust and there are no bugs like in Ethereum that would cause problems. Economic models change and they need to change.
FL: Speaking of blockchain, how deep is the level of penetration of the technology in Japan?
M.T.: If we talk about banks and other financial institutions, everyone knows about blockchain, there’s hardly anyone who doesn’t. People are really interested in the technology and study it, and books on blockchain are very popular in Japan. At least there’s not a single major company that doesn’t know what blockchain is. People in finance maybe even progressed to the point where they also know about the downsides of the technology, they know what it can do and what it can’t do.
So, lots of companies are interested in the technology, but individuals, well, I think basically not.
For normal people, their interest is more economical, I think. There are big companies like Bic Camera or online credit card processors that accept Bitcoin on one hand, and on the other hand, Japanese people don’t really use Bitcoin in daily life. Maybe until this year day Bitcoin’s reputation wasn’t too good, but after the Financial Services Agency changed the regulation people are starting to look at it more than before.
FL: Are there any special courses in Japan where people can study the technology?
M.T.: It’s interesting, but there’s not much education on blockchain right now. There are lots of people who are interested, but at the university level there’s really not much educational classes about it. Part of the reason maybe is the connection to cryptocurrencies, because in the academia you don’t want to have financial incentive. Blockchain is not just Bitcoin, blockchain itself is very interesting technology from the theoretical standpoint, so hopefully we’ll start to see more penetration into the classroom, and more computer science courses teaching blockchain development skills and things like that.
Anyway, it’s still very early in the field, there are no standards, and because of that I think it is going to take some time before we see more of it.
FL: Recently there have been many big banks and companies embracing blockchain, researching various aspects of the technology. SBI Holding, Bank of Tokyo-Mitsubishi UFJ, Mizuho just to name a few, also there’s Ripple obviously having interest in Japanese market. What do you think is their main incentive here?
M.T.: Yeah, it’s a good question. SBI has always been impressive in fintech, and their collaboration with Ripple is just one example of that. They are a huge financial group and they’ve always been very aggressive. They intend to open their own cryptocurrency exchange, and they’ve also been working on bringing other smaller banks into one network that will produce cost-efficient settlement. Whether it will be a success or not, I don’t know.
Mitsubishi are also doing something with that MUFG Coin. There’s very little detail about the project, but basically it’s a digital Japanese yen that is backed by Mitsubishi’s settlement. We could say it’s a private coin. Some Japanese banks are using Mitsubishi’s settlement, so I can see that settlement network will be expanded by creating a digital currency. It could be very strong, but not much details so far.
SBI is always going to be very aggressive with new things, and they are really fast. It’s funny, because Mitsubishi are bigger, but very slow. SBI are leaders in some sectors, they are very successful in banking and net security, and this also affects trading. That’s why I believe it’s a big deal that they’ve created companies that handle Bitcoin too.
FL: Cryptocurrency regulation in Japan is considered as one of the most progressive in the world today. The country has effectively legalized Bitcoin, the 8% consumption tax has been eliminated, while more and more retailers announce they start accepting cryptocurrency. Will this ultimately pave the way to broader acceptance?
M.T.: We had the ability to pay with Bitcoin for a lot of things for many years now, but if we speak about average consumers, I don’t think they have a lot of Bitcoins. As I said before, people tend to buy Bitcoin not use it as currency, instead they hold it thinking the price will go up. You don’t buy Apple shares and then go to Bic Camera to buy gadgets and stuff with these shares.
Besides, most stores have certain limits, something like one thousand dollars per transaction, and you can’t even buy a decent camera with that amount. I think it’s more like the way for companies want to be closer to technologies, but it is also a good training ground for the accounting so that you see how you do this with cryptocurrencies. Many companies still don’t know how to report this.
FL: And Soramitsu is not on the list of companies that work with Bitcoin…
M.T.: No, we work with fiat money even though we have to deal with blockchain technology. Bitcoin is an interesting space that I try to follow, and there are other new exciting projects which I always look at even if I don’t invest. I want to see what innovations they are working on, and whether they solve the need that we have. There are several unsolved problems in the blockchain space, so it’s important to follow things.
And of course we also work on our own project and have our own philosophy. That’s what Hyperledger Iroha is about: try to keep things simple while doing complex things in a concise way. And I think we are doing some innovative stuff, both locally in Japan and on global scale. And we have a lot of fun doing what we do.
Makoto Takemiya was interviewed by Andrew Asmakov
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