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Last month Japanese cryptocurrency exchange Coincheck announced it would have to pay back more than £300m to customers after their system was hacked, affecting 260,000 customers. The attack, described as the biggest digital currency theft in history, was the most high profile case in several hacks to affect Japanese cryptocurrency firms. However, unlike their neighbours China and South Korea who are clamping down on the use of online money, the risks have not deterred Japan from their mission to be the first country to widely use cryptocurrencies as legal tender.

Takashi Shiono, an economist at Credit Suisse in Tokyo, said: “There are estimates that tax revenue from the cryptocurrency business, including capital gains taxes from individual investors and from corporations, could amount to 1 trillion yen (US$9.2 billion), though that is very speculative at this stage.” The Japanese economy has suffered from decades of stagnation since the start of the 1990s, dealt with a massive national debt and with the problems of a shrinking population and tax base. The Tokyo Government is hoping the capitalise on the growth in interest for cryptocurrencies as their opportunity to improve the Japanese economy.

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Ken Kawai, partner at law firm Anderson Mori & Tomotsune and adviser to finance-tech start-ups, said: “Regulators in Japan are usually conservative and not first movers. “The Government wants to facilitate fintech through cryptocurrency and blockchain technology.” Cryptocurrencies are particularly popular among young Japanese investors lured by the prospect of strong profits in an economy that has seen ultra-low interest rates for many years and low returns from traditional assets. The hope from Japan is that the crack downs on the use of online money from other countries around the world will attract more investors to Tokyo.

GETTY Japan is hoping to become the cryptocurrency capital of the world

South Korea introduced a raft of measures last month aimed at regulating Bitcoin and similar currencies such as Ripple and Ethereum. A ban on anonymous trading was implemented by the Asian power in a bid to crack down on all possible criminal activities the secret nature of trading Bitcoin allowed. Following the Coincheck hack, some analysts expect to see an increase in Japanese regulation for cryptocurrencies but less than other countries in order to remain competitive.

GETTY Japan has not cracked down on cryptocurrencies unlike China and South Korea

GETTY Japan based Coincheck apologised after the biggest digital currency theft in history