Coinbase quits Japan after less than two years

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U.S.-based Coinbase (NASDAQ: COIN) announced this week it would be “halting” operations in Japan, citing market conditions. The exchange, which opened in Japan less than two years ago, is giving local customers until February 16, 2023, to withdraw all assets from platform wallets, including fiat currency.

Any digital assets still in Coinbase wallets after that date will be converted to JPY and put under management of Japan’s Legal Affairs Bureau.

Coinbase opened its official operations in Japan only in August 2021, saying, “today we are excited to be launching Coinbase in Japan, one of the largest markets by crypto trading volumes in the world.” The exchange promised it was “committed to increasing the use of crypto in Japan by bringing a best-in-class product offering,” as well as multiple retail products based on a suite of the top five trading assets.

Despite its longevity and well-known name in the digital asset industry, Coinbase had reportedly struggled to gain a foothold in the Japanese market. According to Coingecko, the country’s top five trading exchanges by volume are all local entities: bitFlyer, Coincheck, Bitbank, GMO Japan, and BTCBOX.

Another U.S. exchange, Kraken, also closed its Japanese branch (for the second time) in late 2022.

The now discredited FTX had acquired Japanese exchange Liquid (formerly Quoine) in February 2022, following a hack on Liquid’s wallets that saw the company lose US$90 million. Before the end of that year, however, FTX itself collapsed—and Liquid customers are still waiting to regain access to their assets.

FTX’s downfall may have contributed to a further drop in trust for foreign-based subsidiary platforms in Japan, where the market tends to favor locally-based products and services in most sectors.

However, the ongoing bear market in the digital asset trading industry has been harsh on several well-known names, likely making Coinbase’s entry into Japan more difficult. Coinbase itself has seen shares slide on Nasdaq from US$252 in September 2021 to just over $50 today, with most of that decline happening in the first months of 2022.

Just over a week ago, Coinbase announced plans to cut another 20% (around 950 jobs) from its workforce and said it aimed to cut operating expenses by 25%. An SEC filing also stated it expected losses to be as high as US$500 million in 2022. There had been a previous 18% cut in staff announced June 2022, when CEO Brian Armstrong cited economic recession and potential extended “crypto winter” as reasons. “We grew too quickly,” he added, amid a strong bull market that saw “new use cases enabled by crypto gaining traction practically every week.”

Armstrong has sold close to US$300 million of his own Coinbase stock and other insiders at the company have ditched over $5.8 billion in personal shares.

Good riddance, speculators

Despite the so-called “new use cases,” most digital asset activity still revolves around speculative trading as “users” chase profits denominated in local fiats. Asset prices are still the main conversation topic in blockchain among the general public, where few could name any use cases other than investment. Trading exchanges remain the blockchain industry’s most lucrative businesses—at least for their founders and well-connected investors.

This laser (eyed) focus on speculative gains, and hype surrounding rapid fiat-value increases, has been a major factor preventing the adoption of BTC and other blockchains in the real-world economy. Investors concentrate on accumulation and “HODLing” assets rather than utility or commerce, fearing a loss of potential future fiat value should they actually spend them.

Therefore, the continuing bear market and potential failure even of well-known exchange brands could be healthy for blockchain in the long run. Real new use cases must bring real-world economic benefits and even create new economies, which would in turn drive new interest in the promise of the technology itself.

Follow CoinGeek’s Crypto Crime Cartel series, which delves into the stream of groups—from BitMEX to Binance, Bitcoin.com, Blockstream, ShapeShift, Coinbase, Ripple,
Ethereum, FTX and Tether—who have co-opted the digital asset revolution and turned the industry into a minefield for naïve (and even experienced) players in the market.