Writing: Bitget Research Institute

Abstract

• Japan is the earliest market to explore cryptocurrencies, and currently, the daily number of participants in the region reaches around 350,000.
• In terms of regulatory environment, the Japanese government has long been aware of the importance of regulating cryptocurrencies and has successively studied and implemented relevant policies. Japan's cryptocurrency policy focuses on industry guidance and encourages industry development.
• In terms of blockchain preferences, Japanese users are familiar with NFT trading, DEX trading, and are enthusiastic about participating in on-chain task platforms, metaverse games, and other sectors.
• In terms of trading preferences, Japanese users prefer spot trading, mainly trading mainstream coins and local project tokens in Japan, and are keen on investing in older project tokens.
• In terms of centralized exchange preferences, unlike most regions, Japanese users have a relatively high demand for localized centralized exchanges. As for decentralized exchanges, Japanese users mainly use Uniswap, Pancakeswap, and other leading decentralized exchanges on various public chains. The most commonly used wallets are MetaMask, Bitget Wallet, Phantom, Trust Wallet, and Coinbase Wallet.
• Finally, based on the above analysis, Bitget Research Institute has made five major predictions for the future trends of the cryptocurrency market in Japan.

Introduction

Japan is a country with a rich historical and cultural heritage, known for its unique traditional culture and modern innovation. Japan enjoys a global reputation in technological innovation and finance, and its stable financial system and innovative financial technology make Japan an important player in the global economy. Japan is also one of the earliest countries to understand, pay attention to, and encourage the development of cryptocurrencies. In the field of cryptocurrencies, Japan is a pillar of the global market.

The adoption rate of cryptocurrencies in Japan is currently at a leading position globally. In recent years, Japan has gradually introduced a regulatory framework for the cryptocurrency industry, with policies focusing on industry guidance and encouraging the development of related industries. Therefore, cryptocurrencies have become an important choice for Japanese users to make alternative asset investments.

This article provides a comprehensive overview of the current situation of the cryptocurrency market in Japan through in-depth market research. This not only helps Japanese users find their own ecological positioning and communities with similar interests but also helps Web3 project teams and cryptocurrency institutions better understand and develop the Japanese market.

I. Overall Market Situation

1. Regional Overview

In terms of the overall volume and acceptance of cryptocurrencies, Japan is at the forefront globally. According to Chainalysis' 2023 Adoption Index data, Japan ranks 18th globally, similar to the rankings of the UK and Canada, and ahead of major Western European countries such as France, Germany, and the Netherlands.

Looking at the sub-rankings of the components of Japan's cryptocurrency Adoption Index, the region shows the characteristics of "similar adoption rates of CeFi and DeFi in the global rankings, with P2P transactions far below the global average."

Japan exhibits two distinct features in the cryptocurrency market: "overall average" and "specific preferences."

"Overall average" refers to the fact that among the distinctive East Asian countries, Japan's major indicators are closest to the global average. As shown in the following two figures, in terms of cryptocurrency transfer volume and the types of platforms used, Japan's data is very close to the global average, while other East Asian countries show significant differences.

"Specific preferences" refer to the relatively high enthusiasm of Japanese users for first-generation memes such as SHIB and early blue-chip tokens like XRP and ADA, even when many traders are chasing hotspots such as Solana Meme, AI, and DePIN.

In addition, Japan has strong local exchanges such as Bitbank, Bitflyer, and Coincheck, which dominate the local CEX market share. Middle-aged and older traders show a stronger tendency to use these local exchanges.

2. Cryptocurrency Policies and Cultural Influence

2.1 Cryptocurrency Policies in Japan

Previous Regulatory Attitude in Japan

As early as 2014, Japan experienced one of the industry's most serious setbacks—global major Bitcoin exchange Mt. Gox was hacked and went bankrupt. This event resulted in retail investors losing up to 850,000 bitcoins.

In 2018, the domestic exchange CoinCheck in Japan was also hacked, resulting in users losing $534 million worth of virtual assets. Coincheck subsequently announced compensation for user assets. These two events highlighted the importance of enacting relevant laws to protect investor funds, maintain market stability, and regulate cryptocurrency assets. Subsequently, the Japanese government actively planned schemes to regulate virtual assets.

Current Regulatory Attitude in Japan

In recent years, the Japanese government has introduced clear regulatory schemes to promote the reasonable and secure development of the cryptocurrency field, including:

• In 2017, Japan amended the "Payment Services Act" to bring cryptocurrency exchanges under regulatory oversight, implementing a licensing system supervised by the Financial Services Agency (FSA).
• Since 2021, Japan's cryptocurrency industry has been addressing the Travel Rule issue. At that time, the Financial Services Agency (FSA) in Japan required virtual asset service providers to implement the Travel Rule.
• In April 2022, the Japan Virtual Currency Exchange Association (JVCEA) introduced the Travel Rule into its self-regulatory rules for virtual asset service providers.
• In October 2022, the Japanese government approved a cabinet resolution to revise existing laws to curb money laundering using cryptocurrencies based on the guidelines of the Financial Action Task Force (FATF).
• In June 2023, Japanese lawmakers confirmed plans to implement stricter anti-money laundering (AML) rules for the cryptocurrency industry.

Overall, due to the Mt. Gox and CoinCheck incidents, the Japanese government has long been aware of the importance of regulating cryptocurrencies and has successively studied and implemented relevant policies. With the continuous introduction of regulatory policies, Japan's regulation of cryptocurrencies has become clearer and stricter, with a focus on industry guidance and encouragement of industry development.

2.2 Cultural Influence in Japan

The cultural characteristics of Japan are deeply rooted in its history. The cultural traits of Japan not only shape the daily life of Japanese society but also have a profound impact on its art, education, and business practices. The influence of Japanese culture in the cryptocurrency industry is mainly reflected in the following aspects:

• Emphasis on education: Education is extremely important in Japanese society, and both families and schools have high expectations for students. This has led to a relatively high level of education among Japanese residents, and the participants in the cryptocurrency market in Japan are generally a highly educated group.
• Emphasis on innovation: Japan is at the forefront of the world in terms of technology and innovation, and this spirit of innovation also permeates into the Web3 field, such as some innovative localized gaming projects.
• Emphasis on art: Japan has a rich tradition of art and literature, and its anime culture and IP industry are relatively developed. Artists like Takashi Murakami have used art on the blockchain to achieve secondary creation and copyright protection, leading to a decent NFT user base in Japan.

3. Market Size

Looking at the total visits to CEXs by users in the past six months, Japan's market size is between that of Turkey and Indonesia, approximately two-thirds of South Korea's.

It is estimated that in April of this year, the number of Japanese users trading on CEXs daily ranged from 310,000 to 360,000.

II. Characteristics of Local Cryptocurrency Users

1. User Trading Habits

1.1 Overall Profile of Japanese Users

Image: Word cloud of cryptocurrency user habits in Japan

Source: Google Hot Keywords

Japanese users have an open attitude towards cryptocurrency trading and project interaction, with the following characteristics:

• Japanese users have a very high acceptance of cryptocurrencies and hold a high global market share.
• Japanese users pursue hot asset sectors in the market, mainly reflected in keywords such as "Pepe," "AI," and "GPT" on the word cloud.
• Japanese users are interested in on-chain asset interaction, especially in the NFT sector, showing a particular interest in "Wallet," "NFT," and "Blur."

1.2 Trading and Interaction Habits of Japanese Users

In terms of trading, Japanese users prefer spot trading, mainly trading mainstream coins (BTC, ETH, XRP, SOL, DOGE) and local project tokens in Japan. The reasons for this situation are: 1. Due to legal restrictions in Japan, local exchanges can only trade coins approved by the Financial Services Agency and derivative trading cannot exceed 2x leverage. As a result, some Japanese contract trading users and altcoin trading users choose to trade on overseas exchanges. 2. The English proficiency of Japanese users is generally average, and their awareness of new projects is not timely. Instead, they focus more on purchasing older generation meme coins (e.g., SHIB, DOGE) to profit from continuous price increases. Additionally, Japanese users tend to be long-term holders, mainly because cryptocurrency profits in Japan are subject to taxation, with tax rates as high as 45%. Therefore, Japanese users focus on long-term investment returns rather than short-term profits.

In terms of application interaction, due to Japan's strong foundation in traditional gaming, many localized on-chain gaming projects in Japan tokenize in-game items and assets, forming encrypted assets such as NFTs and tokens. Therefore, Japanese users are familiar with on-chain DEX trading, NFT transfers, and on-chain contract interactions.

Regarding payment and asset deposits and withdrawals, most users exchange cryptocurrencies on local exchanges for deposits in Japan. However, some users also use fiat currency trading (P2P, third-party, card purchases, etc.). Japan has a relatively good crypto payment environment, with offline stores in bustling areas such as Roppongi and Ginza accepting BTC and ETH token payments.

2. Popular Sectors and Projects

(1) Popular Projects & Sectors

Japanese users have high participation in NFT trading, on-chain task platforms, on-chain trading, and Web3 games. Two of the top ten visited projects are NFT trading websites (Opensea, Magiceden), indicating a high enthusiasm among Japanese users for NFT trading. This is followed by Web3 task platforms and DEX market trading websites, indicating that Japanese users have a certain level of interest in participating in various project airdrops and trading on-chain assets.

Additionally, the Japanese market has some local projects that are favored by investors. For example, the relatively early blue-chip token Cardano (ADA), known as the "Ethereum of Japan," has gained popularity. Its founder, Charles Hoskinson, has held several lectures and events in Japan to promote Cardano's technology and vision. The Internet of Things platform JasmyCoin (JASMY), founded by former Sony employees, has also begun promoting the narrative of "AI + IoT" and saw a significant threefold increase in traffic in Q2 of this year. Furthermore, projects led by Japanese teams such as Astar (ASTR) and Oasys (OAS) have high visibility and trading demand locally.

It can be seen that in local Japanese projects, there is a lack of traditional DeFi projects, Layer2, and other infrastructure projects. Instead, there is more extension of Web2 businesses, such as the blockchainization of Web3 gaming projects, the Web3 transformation of Web2 IPs, and the Internet of Things. This makes Japanese local projects appear less Crypto Native, but they are relatively advanced in integrating blockchain technology with the real world and implementing practical applications.

(2) Cryptocurrency Topics Most Concerned by Japanese Users in the Past Three Months

Looking at the search popularity of "Cryptocurrency" related terms among Japanese netizens: the end of February to early March of this year was the period of highest interest in cryptocurrencies among Japanese netizens over the past year. This occurred during BTC's rapid rise and testing of new highs.

Interestingly, globally, including in the US, UK, and the UAE, the peak search volume for cryptocurrency-related terms occurred from Mar 3 to Mar 9, which is earlier than the peak search volume for cryptocurrency-related terms in Japan. This may indicate that Japanese netizens are more sensitive to the price of BTC.

In terms of the most searched terms over the past year, Japanese users are keen on searching for:

SHIB, DOGE, Solana, XRP, ADA

In the past three months (Feb 28 - May 28), the following terms have seen a surge in search popularity in Japan:

PEPE, QUBIC, AEVO, NOT

This indicates that:

Japanese users have a high level of interest in first-generation meme coins, including DOGE and SHIB, which may also indicate that Japanese users have a particular fondness for dog-related meme images such as Shiba Inu and Akita dogs. According to internal data from some exchanges, BABYDOGE is also one of the most traded meme coins by Japanese users. The latest generation of hot memes such as BOME and SLERF did not appear in the trending searches.

Japanese users are still enthusiastic about trading old blue-chip tokens such as XRP and ADA, which have not appeared on the top search lists in most other countries over the past year. Additionally, the collaboration between the Japanese financial giant SBI Group and Ripple has contributed to the sustained high traffic of XRP in Japan.

These two points also confirm the specific preferences of the Japanese region in cryptocurrency trading.

3. Local Community Social Media

The main battleground for local communities in Japan is Twitter, Youtube, Line, and Telegram, with the primary language being Japanese, and English content is also present but Japanese content holds a dominant position overall. Compared to other countries, Japan favors vertical media, with Coindesk and Cointelegraph having dedicated Japanese websites with separate domains and full Japanese content. The largest traffic in vertical media is Coinpost, with a monthly visit volume of up to 2.5 million, followed by Cointelegraph, which has a monthly visit volume of around 1.5 million and is relatively more popular.

III. Competition Landscape and Platform Advantages

1. Centralized Exchanges

Over the past year, the traffic to CEXs by Japanese users has shown an upward trend, with a UV of 2.58M in April 2024, representing an approximately 17% year-on-year increase.

Coinbase and Kraken began to exit the Japanese market in Q1 2023, providing greater development opportunities for local exchanges and other global exchanges. Japan has several strong local exchanges, such as Bitbank, bitFlyer, and Coincheck, collectively occupying over 42% of the CEXs traffic share. This is in stark contrast to the data from most European and Southeast Asian countries. These three local exchanges were established as early as 2014, preceding several well-known top international exchanges, and their early accumulation has laid a solid foundation in Japan.

In terms of user profiles, the male-to-female ratio of Japanese users using CEXs is approximately 3:1. In terms of age distribution, the number of users aged 18-34 is equal to the number of users over 35, each accounting for half. Interestingly, the younger age group of 18-34 prefers to use international exchanges, while the older age group of 35 and above tends to prefer using local Japanese exchanges.

In addition to the aforementioned local exchanges, Rakuten's wallet is also popular among users. Essentially a CEX, it is backed by the Rakuten Group. The core business logic involves users depositing Japanese yen to obtain Rakuten cash (R Cash), which is then used for cryptocurrency investments. Rakuten cash fulfills the platform's user deposit and withdrawal needs, as well as cryptocurrency investment and payment scenarios, linking Japanese users' cryptocurrency investments with daily consumption.

2. Decentralized Exchanges

The top 3 rankings of DEX websites visited by Japanese users show significant differences compared to other regions: Pancakeswap > Jupiter > Uniswap. Japan is one of the very few regions where Uniswap does not rank first, and even has lower traffic than Pancakeswap. This to some extent reflects the relatively lower interest of Japanese users in ETH and base chain transactions compared to tokens on the Solana and BSC chains.

Most users access these decentralized exchanges directly, with some using Google search and social media links to log in. This indicates that Japanese users place a strong emphasis on visibility when using decentralized exchanges, and once they form a habit, they tend to be loyal to the brand. Twitter plays a role in directing traffic, but its contribution is not high.

3. Wallets

In terms of wallet usage, the top 5 wallets in the Japanese region are MetaMask, Bitget Wallet, Phantom, Trust Wallet, and Coinbase Wallet.

MetaMask, as one of the earliest wallets in the Ethereum ecosystem, has a good first-mover advantage. Most EVM-compatible public chain ecosystem projects generally prioritize support for MetaMask. It is very popular not only in Japan but also globally.

Bitget Wallet has surged to second place in downloads in the Japanese region, second only to the Metamask wallet, thanks to its rapid iteration based on keen market insights. Bitget Wallet currently supports over a hundred public chains and its innovative liquidity aggregation algorithm in the Swap aspect provides users with a smoother trading experience. Recently, it has also added support for the Solana public chain in terms of on-chain changes and intelligent market recommendations, expanding users' awareness of on-chain dynamics on the Solana chain and helping users quickly capture more on-chain alpha in the continuously hot MEME market. In the NFT aspect, Bitget Wallet's NFT marketplace is the first platform to support the purchase of NFTs using any cryptocurrency. Its insight into user needs and rapid support has propelled it to second place in the download rankings in the Japanese region.

Due to the recent popularity of the Solana ecosystem, Phantom, as the most popular native wallet on the Solana network, has risen to third place. Phantom accumulated a large number of high-quality partners in the previous round, and in this round of the Solana market, it formed a huge traffic matrix with high-quality ecological projects, leading to a rapid increase in Phantom's user base. There are also rumors circulating on social media about the possibility of Phantom conducting a coin airdrop. Thanks to the strong resurgence of the Solana ecosystem, combined with the wealth opportunities in the MEME market and ecosystem, as well as potential airdrop expectations, the Phantom wallet is very popular in the Japanese region.

Trust Wallet, launched in 2017, has a good first-mover advantage and its simple and user-friendly design aligns with the habits of Japanese users, making it popular among many users.

Ranked fifth is Coinbase Wallet. Although Coinbase announced its exit from the Japanese market in January 2023, and users in Japan cannot currently use the Coinbase exchange, Coinbase Wallet can still be used. Backed by the authority and security of Coinbase, Coinbase Wallet remains a choice for many users in the Japanese region.

Conclusion

Japan is known for its unique blend of traditional culture and modern innovation, and its faster acceptance of new things compared to most countries. It is one of the earliest countries to understand, pay attention to, and encourage the development of cryptocurrencies. This report mainly investigates the cryptocurrency market situation in Japan from three major aspects: "Overall Market Situation," "Characteristics of Local Cryptocurrency Users," and "Competition Landscape and Platform Advantages."

From the overall market perspective, Japan's overall volume and acceptance of cryptocurrencies are at a leading position globally, ranking 18th in the world. The "daily active users" of Japanese users on centralized exchanges is approximately 350,000, comparable to Turkey in terms of user volume.

From the perspective of regulation and cultural influence, due to the "Mt. Gox hack" incident, the Japanese government early on recognized the importance of regulating cryptocurrencies and has successively studied and implemented relevant policies. Due to Japan's emphasis on education, innovation, and the arts, Japanese users generally have a high level of education and a relatively high level of interest in blockchain games and NFTs.

Japanese users are generally familiar with cryptocurrency trading and on-chain project interaction, with the following characteristics:

• Japanese users prefer spot trading, mainly trading mainstream coins and local Japanese project tokens.
• Japanese users have a high level of interest in first-generation meme coins, including DOGE and SHIB, and are also enthusiastic about early blue-chip coins such as XRP and ADA.
• Japanese users have high participation in NFT trading, on-chain task platforms, on-chain transactions, and Web3 games.

In terms of competition landscape and platform advantages, local exchanges occupy over 42% of the market share, much higher than in Western Europe, Southeast Asia, and other countries and regions. There is not much difference in data for decentralized exchanges, and usage habits are concentrated in top public chain decentralized exchanges such as Solana, BSC, and Ethereum. In terms of wallets, MetaMask, Bitget Wallet, Phantom, Trust Wallet, and Coinbase Wallet are the top 5 wallets used by Japanese users.

Finally, based on comprehensive research by the Bitget Research Institute, looking ahead to the second half of 2024, we expect the following developments in the Japanese market for readers' reference:

• With the introduction of global compliance policies and the listing of cryptocurrency ETFs in the United States, more institutional users and retail investors in Japan are expected to participate in cryptocurrency market investments.
• The cryptocurrency adoption rate among Japanese users will continue to increase, maintaining a position in the global top 20. The number of daily active users (DAU) participating in cryptocurrency trading in the Japanese market is expected to increase from 350,000 in 2024 to around 500,000 by the end of 2024.
• Japanese users will continue to be enthusiastic about participating in local projects, such as blockchain games, and their participation in NFT and on-chain task platforms will continue to increase.
• 1-2 projects in the Japanese region may receive capital support for on-chain games and become important global cryptocurrency projects.
• Wallets with trading aggregation functionality and NFT trading capabilities are expected to gain more favor among Japanese users.

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