Japanese regulations have restricted banks’ abilities to invest in fintech startups, including Bitcoin and blockchain companies. However, that is about to change. Japan’s biggest banks are now reportedly looking to pour hundreds of millions of dollars into fintech, including blockchain companies.
Japan’s Banking Law Removes Funding Limits
The long-standing Japanese Banking Act prohibits local banks from holding more than 5 percent ownership of any Japanese company. Certain other finance-related businesses are exempt — the ownership limit rises to 15 percent for bank holding companies.
This rule put Japanese banks at a disadvantage because they could not invest in fintech companies, including bitcoin and blockchain startups.
In May, however, a Banking Law revision easing this rule passed the National Diet. This rule change allows banks to ignore the 5 percent limit on stakes in non-financial companies — if they’re developing information technology to enhance financial services.
According to the Financial Times, the law change means:
“Japan could become a big new source of funding for start-ups, especially in Asia, that are experimenting with technologies such as blockchain or artificial intelligence.”
From Regulating to Nurturing
“The financial ministry which used to regulate the industry must now nurture the industry,” said Deputy Prime Minister and Minister of Finance, Taro Aso.
“We are making efforts towards this end. We haven’t done enough but with this new policy we have greatly changed our thinking in approaching the issues,” he added.
Bank of Japan’s FinTech Centre head, Naoyuki Iwashita, explained the reason behind this change.
He said: “Japanese institutions are concerned that a Google Bank or Facebook Bank will conquer Japan.” Japan is pushing this fintech effort to prevent Silicon Valley from decimating the country’s banking sector, as it did the mobile phone industry.
Out With Old IT Systems, In With Blockchain?
According to Mizuho Financial Group CEO, Yasuhiro Sato,
Japanese regulators wanted to preserve old but proven IT systems.
But, he told the FinSum conference, organized by the Financial Services Agency (FSA) and Nikkei that they “are now changing their thoughts on that.”
He further commented that the banking law will change “in order to obtain more technological advances from outside participants.”
How much do you think these Japanese banks will invest in bitcoin companies? Let us know in the comment section below.
Images courtesy of Shutterstock, Bank of Japan, Mizuho, Japan Cabinet.
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