Japan's government is seeking to make Tokyo the global center for cryptocurrencies. Japan's Financial Services Authority (FSA) regulates virtual currency exchanges, and in April 2017, Bitcoin was recognized as legal tender in the country. But with several major hacking robberies of cryptocurrencies from Japanese exchanges, security concerns are rising. 

Japan's IT systems no longer "off the radar"

Tim Romero, founder and host of the innovation website and podcast "Disrupting Japan," describes the factors that put Japan's cryptocurrency trading at risk. "Japan has gotten away with decades of security by obscurity. This is due both to the fact that a lot of the systems until very recently have been only made in Japan, and only used in Japan," he said.

Romero went on to depict the transition to the current at-risk Japanese IT landscape. "About ten years ago, as people started moving onto the web, there was a shift into kind of a standard way of doing things, interfacing with standard systems. And now, the whole world of hackers can attack these systems in a way that they could not before."

Financial Services Agency goes proactive

Indeed, Japan's cryptocurrency hacking heists are some of the largest robberies in history, with two of the online capers netting amounts in the 400 million to 500 million-plus U.S. dollar range. But Japan's Financial Services Agency has taken actions that, for now, have preserved traders' confidence.  

"The FSA has shut down the offending exchanges, they've merged those exchanges with larger companies, and they've made their customers whole," Romero said.

Kanda Myoujin Shrine, near Tokyo's electronics district of Akihabara, dates from the 13th century, and is now the place to pray for people facing "electronic hardships." But those buying cryptocurrency today must put their faith in the currencies' underlying technology.

Taizen Okuyama, president of Tokyo-based Money Partners Group, one of the largest foreign exchange brokerages in Japan, insists that blockchain technology is sound, though regulations and enforcement are still developing.

"I think the financial regulations in the current cryptocurrency system are somewhat insufficient, but that doesn't mean that the public blockchain itself is flawed or defective," he said. "We just need to create the financial systems and regulations for it."

Price of security: some inconvenience

This year, Japan's National Police Agency is aggressively stepping up its budget, equipment and software for monitoring of cryptocurrency trading and enforcement of related laws.  

Okuyama and Money Partners have enough confidence in "crypto" security that they will continue trading. And while government-imposed security measures may create some hurdles or market interference, they can also provide a degree of safety. 

"This year, I've heard opinions from abroad that Japanese cryptocurrency is bad and lagging, due to Japanese laws and regulations getting tight and strict on cryptocurrency. But I think our law and regulation is one step ahead in the world," Okuyama stated.