The World Is Cracking Down on Bitcoin—Except Japan

latest news. And I thought, oh, wow, the biggest hack yet. All right, that's a pretty big deal. An exchange in Japan that fell prey to what could be a record heist is now under government scrutiny. Coin check says five thirty million dollars worth of cryptocurrency was stolen by hackers. That would be the biggest ever theft of digital currency.

Roger himself didn't have any money at coin check, the exchange of the hackers targeted, but his friend did and called Roger in a path and he called me, and you know, he doesn't speak in English. She's like, you know, yeah, by yah bay, which means like this is this is crazy? What am I gonna do? What? Am I gonna do? A huge hack of a Japanese crypto exchange. It sounded eerily similar to another disaster in Tokyo that went down

four years ago. Four hundred million dollars worth of another cryptocurrency, Bitcoin was stolen from an exchange, also in Tokyo. This exchange went by the name of Mount Cox. Are those two major hackings? But maybe within you know, this eight minute walk of each other, you know, probably more bitcoins have been exchanged than any other place on the planet. So they've had the biggest hacks, but they've had the biggest,

most successful amount of bitcoin trades taking place. So maybe this is a a bit of an epicenter four bitcoin trades happening around the world here right here in Hilia. The hack this time, the one of Queen Check, was particularly embarrassing for Japan because lawmakers there had just implemented some of the world's most cryptocurrency friendly regulations. These were specifically designed to prevent a repeat of the Mount Cox fiasco.

I've talked to a lot of Japanese lawmakers over the past year, and from many of them, these laws were a source of pride. They hope that Japan would serve as a template for the rest of the world in terms of crypto regulation, even as many countries cracked down on it. Now, with half a billion dollars missing, these new cryptocurrency laws are facing their first major test. Hi, I'm Akio and I'm not coming up. And this week Undecrypted, we're taking you to Japan, which has become the world's

premier hub or bitcoin. We'll be tracing the volatile rise of bitcoin here through the eyes of the people who were there from the very start, people like Roger has become known as bit in Jesus for his evangelism or bitcoin right now. There are plenty of critics who say the recent crashing crypto crisis vindicates their cynicism, but supporters are just as bullish as ever. They say the Queen check heist is just a temporary setback. So will Japan continue to embrace this new world or will it turn

its back stay with us. Back in two thousand six, Roger was in his mid twenties and he was both a millionaire and a convicted felon. He was a millionaire from the online business he started that sold old computer parts, and he was an expelling because he sold explosives online through that business without a license. When Roger got out of prison, he decided to leave the US. He had had a Japanese girlfriend once, and I figured since the one Japanese girlfriend was a good experience, I figured the

next one probably would be too. So when I arrived in Japan, actually I was kind of basically retired at that point. I had enough money where I could do what I wanted. And first, first, I don't know, a couple of years, was hanging out and puny and chasing girls and doing that sort of thing. That went on for a while, learning martial arts by day, partying at night. Then in two thousand ten, Rogers stumbled upon bitcoin, back

during its super early days. I heard about this on a show called Free Talk Live, which is a libertarian oriented radio program on in the US, and Roger spent a couple of minutes googling, but then forgot about it. A couple of months later, the same show brought it up again, and then I googled it again, and that's when I put all the pieces together in my mind, and I knew people were going to start using it his money. Roger wanted to invest and he discovered a

company called mount Cox. Mount Cox was a bitcoin exchange. He'd let you buy and sell bitcoin. In early two thousand eleven, moult Cox was the biggest bitcoin exchange in the world, which really saying a lot because at the time there were just barely a handful of other scrappy operations out there. Back then, mount Cox was still run out of San Francisco by an American programmer called Jet

the Caleb. It was a tiny operation and bitcoin was still trading at around eighty cents each, which, fun fact, as of taping, has increased by about one million percent. At around this time, mount Cox also caught the eye of another bitcoin enthusiast living in Tokyo, a man named Mark Carpelez. He's French and he came to Japan around the same time Roger did. According to one of Mark's former employees, you'll meet this person in a second. Mark was drawn here by his love of Japanese anime, manga,

and culture. Mark bought mount Cox from its American founder. He then moved the business to Tokyo. In the meantime, Roger was pouring a significant chunk of his wealth into mount Cox. The first wire sent to Mount Cox was for U S dollars. It was a risk. And then maybe just a couple of weeks later, talking to another friend of mine and he told me sarcastically on the phone, he said, Roger, if you think bitcoin is such a good idea, why don't you buy more of them? You're right?

So the next day I sent another wired amount Cox somebody even more. Roger was all in and his next step was to spread the good word. So one of the things I did was set up the Tokyo Bitcoin meet up group. This was the world's second bitcoin meet up group, after the one in San Francisco. He became an important fixture in the bitcoin community in Tokyo and

we had it in shibullet or fruit parlor. So I contacted them and said, hey, is it okay if we have like a social meet up and we'll we'll buy fruit from you guys, and they said, yeah, sure, no problem. A fruit parlor is one of these places you only see in Japan. It's like a fancy cafe, but instead of pastries or something, you order really expensive fruit. He was about two years later that I first heard about Roger.

One of my friends met him at a house party in Tokyo, and he said, there's this crazy American guy who wouldn't stop talking about some digital currency called bitcoin, and he gave me one whole bitcoin. But I have no idea what that even means. This was something that Razer did a lot. Giving away bitcoin was his way of spreading the word. How much bitcoin do you estimate

you gave away during that period? Thousands and thousands of bitcoins of full bitcoins, Yeah, thousands of thousands, more than ten thousand, Yes, ten thousand bitcoins would be worth what five sillion dollars? Right? No? Oh, non, worth fifty million dollars? So used to me give me ten thousand bitcoin? I'd say at least ten thousand. In those early days, the meetups were attended by mostly non Japanese enthusiasts, Lots of people who are libertarians, a bit of like a hacker

anarchist vibe. There's people who are very much dedicated to to building a kind of solid community. This is Thomas Gluxman, who used to work from outdogs. He attended the meet ups occasionally, not just about like oh, I'm curious about how I can make money from this thing. That was not really the the goal or the focus of bitcoin back then. Then in bitcoin's first boom in late two thousand thirteen, it hit one thousand dollars. The digital currency

has hit a record high morning. The question really is why why has bitcoins served so much? It's not just that prices are going up, it's usage is going up. There are more and more bitcoins. After that, all kinds of folks started coming. They meet up outgrew the fruit Spoiler and moved to a bar in ro Pungy that's one of Tokyo's nightlife areas. Yeah, and the craziest thing that I remember were the burlesque dancers. These were basically

uh well era strippers. They didn't take all their clothes off, but they had QR code stickers on their bodies and he was their bitcoin wallet address. So people if they liked their dancing, they would scan the QR code on their bodies and send them bitcoin with their phone. It's amazing anyway, the burlesque side. For years, this meet up created a forum for people in Japan to learn about bitcoin and balance around ideas. He even convinced quite a number of people to quit their day jobs and embark

on various crypto related ventures. Roger did other things to popularize bitcoin too. Bitcoin got started by a person or a group of people who went by the name of Satoshi Nakamoto with a manifesto that laid out the whole vision for it. That document was written in English, so

Roster paid to get it translated into Japanese. Roger also created YouTube videos explaining bitcoin in Japanese and translated other promotional material like the bitcoin dot org website, and he also invested a lot of his own money and bitcoin startups like Cracking, bit pay and blockchain dot Info. He was one of the two people who initially funded the Bitcoin Foundation, which is an organization that promotes bitcoin adoption,

with five thousand bitcoin. Meanwhile, Roger's meet up continued growing. Soon he was attracting people who would later go on to play key roles in Japan's bitcoin community, people like use O'Connell, a former Goldman sex retistrator. You so now runs the company bit Flyer, which is Japan's largest bitcoin exchange. Do you remember some of the conversations you had with him back then? Was it? Yeah, we both talked about

who you're interested in bitcoin? So, I mean again in that way the meetups that you organized were a lot of you know, and the things that you translated were the first interactions Japanese people have with bitcoin, right thanks to me as the foreigner, I guess. Meanwhile, as more people poured into bitcoin, milkox grew, the company began attracting interest from the Japanese media. This is Thomas, the former

mountdos employee. I remember we would have goals to the office from like the various different TV companies and newspapers asking us like what is bitcoin? How does it work? They thought mount box was bitcoin. You know. Mark was often quoted in the Japanese media as the CEO of bitcoin, So there wasn't that mature level of understanding that you see now in the Japanese media about cryptocurrency and bitcoin and the difference between the exchanges and the cryptocurrency itself.

As mount Dox's influence grew both in Japan and abroad, for some time it handled more than gluevable bitcoin trading, which by the end of thousand thirteen and early two fourteen became a pretty big deal until it all came crashing down in early January. Milk box users started complaining that they weren't able to withdraw their money. The exchange officially announced it was stopping withdrawals in early February and stopped trading in mid fib You worry. The news set

shock waves through the bitcoin community worldwide. In Tokyo, Nolan. It's still not totally clear what happened, but someone, either an inside job or external hackers ended up stealing most of the customers bitcoin deposits at Mount Cox, and those were worth about four dred million dollars at two thousand fourteen prices. Yeah, I was in Japan, and I think people were just stunned more than anything else. Moult Cox was unable to find these deposits and filed for bankruptcy

protection in Tokyo. I remember visiting a police station in Shibia, which is about a five minute walk from Mount Cox headquarters, and sitting down with a man from their cyber crimes division, and it was so clear to me that he was totally clueless about what was going on bitcoin, digital currency, Mount Cox. It was it was all completely new to him. But of course that experience forced Japan to learn and unleash this frenzy to figure out how to never let

something like this happen again. Welcome back. At this point, it's March and Japan is reeling from the hack in subsequent bankruptcy of the Mount Cox Bitcoin Exchange, the authorities knew they had to act to stop something like this from happening ever again, so Japan's Prime Minister signed the job of sorting the sell out to someone in his ruling party. A lawmaker by the name of mine said,

this is when he first learned about bitcoin. If it wasn't from Montgos, he wouldn't have been involved with the bitcoin regulation at all. He was a pure coincidence. He didn't know a thing about bitcoin. With pretty much everyone in the country clueless about what to do, from the police to the banks to establish tech companies, if Gouda did the only thing you could do back then, he went to go meet Roger told you, sure, we know, Yeah, he told me, of course. The first thing I did

was going to Roger's meetups. Instead of searching for experts at all kinds of places, he was faster to just go to the meet up and ask questions there directly with the people who were buying it and using it. That's where he met others like the former Goldman trader used o'conno at this point, I mean, Yuki didn't really have another country's laws he could turn to, for example, since no other developed economy had really waited into this. He was coming up with a new framework from scratch

for bitcoin regulation. He came to believe that he needed to prevent the government from suffocating this Nissan industry to its death, that the industry would more or less be able to regulate itself. Of course, that's exactly what the industry power players like use O'Connell wanted to hear. While Japan has fewer libertarians, in the US, I've met my fair share of gold bugs and government haters at Roger's meetups that I attended. Here's Thomas, the former Mountcox employee. Again.

I think it's really fascinating because um persent. I was just thinking that, Okay, they're probably going to, um, you know, take the Chinese approach of just like okay, which is gonna ban this thing, and you nobody's gonna be able to do this again. We're never gonna hear this again. That's it. But they kind of win the opposite way

of Okay. We think if Gooda ended up proposing legislation that would embrace cryptocurrencies, effectively turning bitcoin into legal tender in Japan alongside with the traditional currency, the Japanese yen. More about in the next day, Miniyuki told me there wasn't much pushback. It wasn't even about pushback or not, because no one even understood bitcoin. No one in the government knew what's good and bad about it. They really

just left it to his team, the technology experts. It was just two people who knew anything, Miniyuki and his boss. The new law was passed in sixteen and went into effect in April. It goes against what governments have done in many other major economies. In the US and Europe, regulators and politicians have been cautious. You see headlines every day with people giving all kinds of warnings. China has outright band trading and initial coin offerings. South Korea also

banned initial coin offerings and cracked down on exchanges. Experson was coming alright, so so she's like, oh, yeah, you can play with bitcoin here, no problem. A couple of months ago, Roger and I went to an electronics store called Comment Up to buy a USB stick with bitcoin. That's the kind of thing you can do now with this new legislation, which made bitcoin illegally recognized form of payment,

Japan is the first major economy to do so. Okay, And now she's pointed at QR code, which roger scanning, and what does it say? Sixty one since it's non cling, send and screen the transaction. The benefit of these new laws is that they give this clarity, this certainty to companies in Japan that want to try out a cryptocurrencies. They don't have to worry about getting punished by regulators for experimenting with something that's legally dubious. Not my phone

sent it, he said, His phone is sent it. Her should pop up with me in the second just okay, okay. The new law also gives the main financial regulator the right to audit and give licenses to cryptocurrency exchanges. This is supposed to protect against hackers and prevent money laundering. For a time, things seem to be going really well

for cryptocurrencies in Japan. In April seventeen, when the new law took effect in Japan, one bitcoin was worth about twelve hundred dollars That rose dramatically over the next few months.

It actually crossed over into record territory last night, moving closer to that eight thousand dollar mark, Bitcoin soars past thirteen thousand dollars for the first time the largest, and by December bitcoin prices were closing in a nineteen thousand dollars Roger has almost certainly gotten rich with his bitcoin investments, although he doesn't want to say exactly how much he owns,

and he's becoming a celebrity in his own right. Towards the end of last year, right around the peak of the hype for crypto, I went to the Tokyo Bitcoin meet up with him, the very one he started just a couple years back. It was nothing like the quiet, intellectual discussions of the food parlor that I was used to. There must have been at least a hundred people packed to this bar in Tokyo. As soon as you walked into the door together, Roger got mobbed by everyone there.

I didn't even get a chance to talk to him for the rest of the night. But a few days before the end of the year, prices started to fall, and by the end of January, several people watching the markets were talking about how the bitcoin bubble might be bursting. Then on January, just when prices were dipping towards ten thousand dollars. The Japanese cryptocurrency exchange coin check announced that it was stopping withdrawals. We were rushing to understand exactly

what happened in coin check. Soon we learned that half a billion dollars of this new currency was missing and that about two sixty customers were affected. In the days after the heights became public, investors got worried that regulators would take action to protect consumers. A threat of more regulation pushed the price of bitcoin all the way down

to six thousand. Ironically, the heist, like the one that had happened at coin check, was exactly the kind of thing that the new Japanese law was supposed to prevent, but its focus on self regulation meant that it was mostly up to each exchange to ensure that it was secure. Here's the lawmaker, Menayuki Good again told me that the law already requires companies to be secure, and how how you take that is up to each individual company to decide.

So he doesn't think it's anything that the government should get involved in. It's up to each individual company and their management. But amid all this finger pointing public outrage and media scrutiny. Something unexpected happened. You think a little known exchange like coin check losing half a billion dollars would doom it, But it turns out coin check was making so much money he was able to use company

funds to plug their giant whole. By mid March, less than two months after the hack, coin check had paid back everyone using its own money, which is just such a different story from what happened with mount Cox. To this day, four years later, Mount Cox's customers are still waiting to get their deposits back. I asked Roger if you thought the industry was getting better at responding to these big hacks, But so, yeah, I guess I do

think that things are getting better. Um, but that doesn't mean that there aren't going to be more horrible experiences in the future. But if you look at the horrible things that central banking have enabled across the world, it's it's certainly not going to be worse than that. So it's a the problems enabled or problems caused by cryptocurrency hackings or pale in comparison to the you know, destruction caused by central banking. For the last couple hundred years.

It's spoken like a true libertarian for sure, although actually coin checks Recovery is quiet at calls for a crypto crack down in Japan. While reporting on the hack, we reached out to dozens of lawmakers and regulators. Not even lawmakers an opposition party thought the laws should be rolled back. Japan is taking to its guns. Here's Thomas, the former Mountgos employee. The fact that now we've gone from Japan

is just so inconspicuous. Crypto hub which happened organically because of the presence of malt Cox and because of the kind of the handful or dozen or so very crypto like crypto evangelists like Roger Vert and a few others for example, who just happened to be based here to this now very much top down driven. Welcome to the Japan. We want to be the crypto hub of Asia, if not the world. And this is what I'm hearing now directly from the dog Yo government. Um, that's what they

want Japan to be seen as. In the meantime, emboldened by the regulatory clarity that the new laws have brought, Japanese companies are continuing to jump into krypto rucked in, which is like Japan's Amazon, set in February that it will launch its own token. Coin check itself was also sold last week to Monic's, a well known online retail broker in Japan, a little bit like e Trade in

the US. What's more, a government back study group this month announced a basic regulatory framework for initial coin offerings, the first of its kind in the world. If Japan and next clear guidelines for icos, it could attract blockchain startups and become a hub for more than just crypto trading. As for Roger these days, well, he's still just as

bullish about cryptocurrencies as he's always been. Every day there seems to be someone new that declares the end of bitcoin, and it seemed like there's this general sense that the bitcoin bubble has popped, but like a true believer, Roger isn't phazed by any of that. So somehow I wound

up with the nickname Bitcoin Jesus. I think a more accurate nickname probably would have been a Bitcoin Johnny Appleseed, because I do feel like I planned a lot of the seeds around the world to help get cryptocurrency started. And uh, it's been a fun ride Um, there's not really anything more fulfilling to work on something that literally can improve the lives of every human being on the planet. Things like that don't come along every day, and here we are right still at the early stages of that.

So it's it's been incredibly fun and I still wake up excited about it every day and hope to continue planning those seeds around the world. And that's it for this week's episode of decryptid. Thanks for listening. Do you have a story about cryptic currencies? You can email us at decrypted at Bloomberg dot net, or you can reach me on Twitter at y Nakamura five six and I'm at A seven. If this is the first time you stumbled upon our show, welcome. We hope you'll subscribe to

Decrypted wherever you get your podcasts. We have at least one more crypto episode coming up in the next few months. This episode was produced by Pia god Cary, Liz Smith, Magnus Hendrickson, and Francesca Levi is the head of the Bird podcast. We'll see you next week.