Japan has the opportunity to become “Crypto Hub of Asia,” says Ethereum co-founder Charles Hoskinson

Fifteen years ago, Bitcoin was first launched, giving investors a new way to speculate. A few people have made hundreds of millions of yen from speculating. On the other hand, cryptocurrencies have been a hotbed of fraud and crypto exchanges have been hacked, with more than a billion yen stolen in one case. This leaves many wondering if crypto will ever live up to the lofty ideas that have been created for it.

Charles Hoskinson, co-founder of blockchain platforms Ethereum and Cardano, sees a future for cryptocurrencies and blockchain that would completely change the global systems that govern us.

Hoskinson’s interest in cryptocurrency began in his 20s.

“I was very interested in cryptography and mathematics and I also liked Austrian economics and the whole concept of sound money. And all those concepts came together with the internet and social media, and it became Bitcoin,” the American entrepreneur told The Japan News during a recent interview in Tokyo.

Hoskinson, 36, found crypto easy to wrap his head around. To him it was like ’email for money’. And he was attracted by the prospect of a programmable currency that “we can adapt and grow,” which he says gives people greater say in global systems.

“This is something that really appeals to me because it maximizes personal freedom and also allows us to get along in a globalized world with generally less conflict,” he said. “We’re having a lot more conflict now because the old governance systems can’t govern these kinds of worlds, and we need new governance systems to do that.”

Cryptocurrencies, unlike the yen or dollar, are not backed by a central bank, but by blockchain, or decentralized peer-to-peer networks that record and share all transactions. In other words, value is not determined by a government, but based on mathematics that Hoskinson calls “an objective truth.”

Blockchain has made fast, cheap money transfers possible 24 hours a day. Hoskinson says the use of the technology has now expanded beyond monetary systems, into supply chains, voting, gaming, intellectual property and other areas where trust plays a key role. However, many people still don’t have first-hand experience with the technology.

Many consumers will likely encounter blockchain for the first time “under the hood” of products they are already familiar with, for example if Sony were to integrate the technology into PlayStations, he said, adding that the spread of such new technology will be exponential.

Still, challenges remain in building what should be a system “for a billion people that never turns off, is cheap to run and self-evolving and that has no central authority controlling it.”

To start with, there is the question of how to reintroduce identity, because transactions now take place without any discussion with the other party and you do not know who you are doing business with. Traditional banks use identity to prevent money laundering and counter terrorism, but blockchain generally lacks this capability.

“We need to add identity back, in a very honest way, and we haven’t quite figured out how to do that as an industry yet,” he said. But once these and other issues are resolved, “you could start talking about a decentralized YouTube and a decentralized Facebook and decentralized AI to compete with OpenAI and all these consumer products that we’re really excited about.”

Crypto in the US

In the United States, whether cryptocurrency gets a boost from government policy may depend on the upcoming US presidential elections. In July, Republican candidate Donald Trump, who once called cryptocurrency a “scam,” promised in his keynote address at a Bitcoin conference to make the country the “crypto capital of the planet.” The event raised $10 million for Trump, Hoskinson said. Two months later, Trump unveiled a new crypto asset company.

According to Hoskinson, Trump has a very different view of the US government today than he did in 2018.

“It is important to understand that people travel and evolve based on lived experiences,” he said. “Today, [Trump] thinks the institutions of the United States are corrupt… and are prosecuting him. So he is very distrustful of the government.”

These experiences, in addition to changing his inner circle, have made him “more open to alternative ideas.” Joe Biden’s approach to crypto has also “created a political opportunity for Trump,” Hoskinson added.

Domino effect

If the United States decides to promote crypto, Japan will follow suit, leading to “a huge spike in adoption,” Hoskinson argues. And because China is unlikely to warm to the technology, the title of “crypto hub of Asia” is Japan’s to lose, he says.

Hoskinson expects the Japanese government will eventually come around to crypto, although this will take time. Japan’s anti-crypto stance could soften if major brands like Mitsubishi, Toyota and Sony can say, “We’ve figured out how to make it secure.”

“Japan has a way of learning from the West, bringing home the best lessons and after figuring this out, becoming a world leader within 10 to 20 years. We’ve seen that happen several times,” said Hoskinson, who has funded blockchain research at the Tokyo Institute of Technology since 2017.

“But the biggest problem for Japanese adoption is that it needs a Japanese Vitalik Buterin,” he added, referring to Ethereum’s young co-founder.