Services Bridging Cryptocurrencies and Investors Are Emerging

In the week starting Monday, March 5, some topical services emerged to bridge cryptocurrencies and investors.

The first service is that the U.S. company Coinbase has announced that it will develop and launch its own cryptocurrency index fund with a large market capitalization. Coinbase will list this cryptocurrency index fund on its own digital currency exchange GDAX and prepare for investment trading in the index fund. Four digital currencies will be included in the index fund, and they will be weighted by market capitalization. This means that at its launch the index fund will be comprised of 62% Bitcoin, 27% Ethereum, 7% Bitcoin Cash, and 4% Litecoin. Investors can easily invest in expected-to-rise cryptocurrencies by purchasing assets in Coinbase’s cryptocurrency index fund.

Another similar service will be provided by Grayscale Investments Inc., which had previously been selling investments in Bitcoin funds to institutional investors, and which has now decided to newly establish four new cryptocurrency funds. The four cryptocurrencies are Bitcoin Cash, Ethereum, Litecoin, and Ripple. Investments in these funds will be sold to qualified accredited investors who possess a certain level of investment experience and asset size. Investors can invest in one of these Grayscale Investments funds in the expectation that the value of the fund will increase without having to manage the cryptocurrency fund themselves.

Originally, it was important that the owners of some cryptocurrency could control their own assets. However, the entities such as institutional investors and hedge funds that are expected to enter cryptocurrency trading in the future will not necessarily have an appropriate cryptocurrency storage system, therefore it is important that they have such capabilities as a fund that stores the cryptocurrency for them on their behalf.

It seems that the business of providing services that enable existing investors to access cryptocurrencies more conveniently will significantly grow in the future.

On the other hand, if the owner of some cryptocurrency does not themselves control the private key associated with their cryptocurrency wallet, there is the possibility of the owner losing their cryptocurrency if an irregular incident occurs at the location where the cryptocurrency has been stored, in the same manner as if cryptocurrency had been deposited in a trading exchange. It is a big advantage of cryptocurrency that the investor can manage their cryptocurrency assets by themselves and only they can control them. However, in the current situation in which cryptocurrency is being used exclusively for investment purposes, it may be economically rational to provide a business service of storing cryptocurrency assets.

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GMO Internet Inc., a major Japanese company investing in Internet-related businesses and listed on the first Section of the Tokyo Stock Exchange, has been publishing monthly reports on its earnings and suchlike from the mining cryptocurrency business it has been conducting since December 20 last year.

Established in 1991, GMO Internet is engaged in the Internet advertising and media, Internet securities, and mobile entertainment businesses across the entire GMO Internet group, centering on the Internet infrastructure business. Furthermore, GMO Internet established GMO Coin, Inc. as a group member, and from May 2017 GMO Coin, Inc. has been providing services that enable the foreign exchange trading of cryptocurrency, and buy and sell transactions of cryptocurrency.

In its monthly report, GMO Internet announces the amount of Bitcoin (the units of Bitcoin and the ticker symbol are BTC) and Bitcoin Cash (the units of Bitcoin Cash and the ticker symbol are BCH) acquired by the company by mining. For reference, GMO Internet also announces the rates as of the end of the month of BTC/JPY and BCH/JPY, and the hash rate, the speed at which a computer completes an operation in the Bitcoin code. GMO Internet reports that these amounts and rates only started to be announced from the 20th in the case of December 2017, and as a result the figures were slightly smaller. However, the hash rate has been increasing from January to February due to the increase in the number of mining computers being operated. In the future, the number of computers being operated will be increased as planned.

December 2017
Bitcoin mining reward: 21 BTC
Bitcoin Cash reward: 213 BCH
Hash rate: 22 PH/s

January 2018
Bitcoin mining reward: 93 BTC
Bitcoin Cash reward: 25 BCH
Hash rate: 27 PH/s

February 2018
Bitcoin mining reward: 124 BTC
Bitcoin Cash reward: 287 BCH
Hash rate: 108 PH/s

GMO Internet also announced that it will start the cloud service Cloud Mining from August 2018. Currently, GMO Internet is accepting advance applications from those who wish to use the service, and from March 2018 the company has been holding briefings about the service in nine cities around the world. Moreover, to realize a next generation mining board computer for high-performance mining, GMO Internet is moving forward with the research and development of state-of-the-art semiconductor chips (mining chips) together with partner companies that possess semiconductor design technology.

In Japan, many listed companies such as major financial services firms and Internet-related companies are planning to participate in the cryptocurrency business. Japan was the first country to develop various legal frameworks such as registering as a licensed cryptocurrency exchange operator by the Financial Services Agency, and in the future attention will focus on how the major players in Japan develop, along with any future initiatives concerned with Japan’s laws and regulations.



Japan’s two major cryptocurrency organizations will merge and form a new self-regulating body, the Japan Cryptocurrency Business Association (JCBA) and Japan Blockchain Association (JBA) said on March 2. The move comes amid deepening discussions about stronger regulations, and was triggered by Japanese cryptocurrency exchange Coincheck Inc.’s loss of massive amounts of NEM coins in late January.

The agreement on forming the new body was made by 16 cryptocurrency exchanges that have completed registration with the Financial Services Agency (FSA). However, the new body will not include exchanges such as Coincheck, whose applications are pending. Currently, details are unclear regarding the new body, such as its name, location and time of establishment, but the aim is to make it a body with legal backing. Companies aiming to complete registration with the FSA will be able to join the organization in the future.

The aim behind establishing the new organization is to strengthen self-regulation of Japan’s cryptocurrency business. The new organization will merge the major players in the cryptocurrency business that had been split before the Coincheck incident.

More major companies in Japan are going to get involved in the cryptocurrency business. Megabanks Mitsubishi UFJ Financial Group, Inc. (MUFG) and Mizuho Financial Group, Inc. are developing their own cryptocurrencies, respectively MUFG Coin and J-Coin, with the latter to be pegged to the Japanese yen.

LINE, a social media platform used by many Japanese, is also expanding into the cryptocurrency business, and Mercari, a flea market app popular in the Japanese domestic market, has also announced its intention to participate. Currently, there is said to be 100 companies on the FSA waiting list for assessment of eligibility to become an exchange.

Expectations are for the new organization to become a positive factor that improves transparency in the business at a time when the cryptocurrency business in Japan is showing signs of taking off.

Bitcoin Core’s long-awaited version 0.16.0 was released on February 27, significantly earlier than its initially planned release date in May.

Among the wide-ranging enhancements in version 0.16.0, the most important is that the cryptocurrency wallet now supports SegWit.

In addition to nested SegWit addresses starting with 3, it also supports the new system of native SegWit addresses starting with bc1.

The backend systems of many bitcoin services already use Bitcoin Core but updating to the latest version will make it easier to use SegWit functions. Installing SegWit is slightly complicated from a technical viewpoint, making it difficult to develop independently. Being able to use Bitcoin Core would significantly reduce that burden.

SegWit’s current adoption rate is about 15%, but it can be expected to be supported by many services from now on.

Coinbase, the biggest and most important digital currency exchange, has also started supporting it. Until now only a portion of Coinbase’s users had been able to use SegWit, but it will become available to all users by the end of this week. Coinbase has more users than any other bitcoin company in the world, but it has been criticized for falling behind in its scalability measures.

Now that Coinbase has finally brought in SegWit, I hope the world’s biggest bitcoin company will not only lead the industry in customer numbers but also in terms of vision and technology.

* The following is a comment written by Fisco Analyst Tetsuyuki Oishi (Bitcoin Research Institute representative, Twitter account @bigstonebtc).

* February 27, 2018, JST

Kumamoto Energy entering the mining business made headlines this week. The Japanese company plans to set up a subsidiary company, wholesale their surplus electricity at a reduced price, and use it for mining cryptocurrencies.

Kumamoto Energy is a so-called unconventional energy company that uses solar power to provide electricity. However, given the nature of energy generation, it has limitations when it comes to controlling the amount of power generated, which usually results in generating surplus power. As a way of utilizing excess electric power, getting into mining is reasonable.

This idea has already been implemented before. An old hydropower facility in a remote area of Austria is also into mining. In this case, the facility was in a suspended state because power transmission lines were old and a significant amount of renewal cost was required to sell electricity again. However, if a mining facility is built next to the power plant, transmission lines will be unnecessary.

Utilization of natural power in remote places for mining will likely increase in the future.

In this case, it is a high-impact story as Kumamoto Energy will start it themselves. If this makes progress, more highly public companies and the government will start mining. And then, if each country around the world gets into it, the security of cryptocurrency would significantly improve.

In connection with the bitcoin scalability problem, Hong Kong’s virtual currency exchange Bitfinex has fully adopted Segwit technical protocol for depositing and withdrawing money. It is the first time that a major investment platform has implemented this.

Coinbase, the biggest cryptocurrency exchange in the US, is planning to start accepting transactions that adopt Segwit next week. Segwit’s remittance ratio will improve greatly by adopting this support.

Currently, the transaction fee for bitcoin is set at its minimum level, and it can be processed smoothly with a commission of about 5-6 yen(5-6U.S. cents).

*The following is a comment written by Fisco Analyst Tetsuyuki Oishi (Bitcoin Research Institute representative, Twitter account @bigstonebtc).

*Written on February 22, 2018, in Japan time.