The cryptocurrency market in Japan has seem many ups and downs since the rise of Bitcoin and its various Altcoin offshoots over the last decade.

There was a time when Japan was regarded as an up-and-coming leader in cryptocurrency legislation. In 2017, Japan declared Bitcoin legal tender. Japanese banks began to openly consider the use of blockchain technology for their own services. Shops and restaurants across the country began accepting crypto, while Bitcoin ATMs and exchange platforms appeared one after the other.

But over time, the situation began to change. In 2018, the Financial Services Agency began to pressure exchanges to drop support for privacy coins like Monero and ZCash. This escalated into a full ban in July of that year, which coincidentally aligned with the launching of PayPay, a centralized and corporate controlled cashless payment system. Bitcoin ATMs began to slowly disappear around the same time, and businesses accepting crypto began to wane as well. In 2019, the National Police Agency spent nearly 3 billion yen on internet surveillance tools, including software to monitor popular cryptocurrency blockchains and their transactions.

What started as a decentralized technology enabling peer-to-peer finance between individuals has instead become a sterile corporatized market, surveilled and restricted by the very institutions it was made to circumvent. Japanese users who wish to purchase privacy coins could still register with overseas exchanges. But considering the willingness of Japanese ISPs to cooperate with government requests for Site Blocking, they could very easily restrict access to foreign exchanges in the near future. Even if they didn’t, all transactions originating from Japan would be subject to Police surveillance. And the case of Coinhive and Moro-san has shown that the Japanese Police are willing to crack down harshly on anybody who even dabbles in privacy coins.

And all of this strikes us as a terrible waste of potential. Which is why we feel it’s necessary to tip the balance of power, however slightly, back towards the individual.

On November 24th, 2020, v1.5.0 of “Bisq” was released. Bisq is a decentralized, peer-to-peer cryptocurrency exchange allowing individuals to freely trade cryptocurrency without the need for permission from any centralized entity. By routing all traffic through the Tor network, it provides a layer of privacy and anonymity for traders, while an automated escrow and robust arbitration system discourages fraud.

More importantly, v1.5.0 is the first version of the Bisq client to be fully localized into Japanese. And because Bisq allows permissionless trades between individuals, it allows Japanese users to trade in privacy-respecting cryptocurrency while shielding themselves from the brunt of the Police’s surveillance powers. While Bisq alone is not enough to guarantee total privacy or anonymity, it is another useful tool in the toolbelt for the privacy-conscious Japanese citizen.

A peer-to-peer currency is meaningless if it’s bottlenecked through a centralized marketplace. We encourage all Japanese cryptocurrency traders to use Bisq, and free themselves from the arbitrary limitations of corporate exchanges.

アノニマスの見解 Ep.12: 公開ブロックチェーンの落とし穴

Hello everyone, and welcome back to アノニマスの見解. It’s been a while since the last episode. My apologies for the long delay.

Unfortunately, the forces of censorship and surveillance didn’t take a break during this period, and there’s a lot to catch up on.

As you might already know, Site Blocking has taken a turn for the worse, with DoS attacks against alleged pirate sites being proposed in government run study groups. CIRO and the Directorate for Signals Intelligence haven’t gone anywhere, and there’s no shortage of new hardware AND software vulnerabilities that threaten your privacy.

But today, we’re going to talk about something different; cryptocurrencies, and how they related to the idea of financial privacy. But first, some background.

In June of this year, Coincheck, one of Japan’s largest cryptocurrency exchanges, announced that it was suspending all trading in Monero, Zcash, Dash, and Auger… all currencies that are designed around the idea of user privacy. This was after the Financial Services Agency threatened stricter regulation of cryptocurrencies in Japan, strongly implying this was a response to government pressure.

Later that same month, the National Police Agency arrested multiple website operators for putting “Coinhive” into their websites. Coinhive is a distributed program that uses the computing power of website visitors to mine for Monero. But the NPA arrested them for violating a law banning computer viruses, implying they believed Coinhive to be a virus, even though there is no official judgement that this is accurate.

Finally, just last month, the National Police Agency announced their budget for 2019, including 2.7 billion yen to fight cyber threats. In that budget was a plan to purchase a blockchain surveillance system from overseas which would allow the NPA to gain a “bird’s eye view” of all transactions on the blockchains of major cryptocurrencies, including Bitcoin and Ethereum, and possibly others. While no information on this system has been announced, there is a high possibility that this surveillance system will be “Elliptic”, one of the most well-known and popular blockchain surveillance tools.

Based on all of this news, it’s easy to understand that the Japanese government is struggling to assert control over the world of cryptocurrency in Japan. Privacy-focused cryptocurrencies like Monero are attacked, while surveillance tools to watch open blockchains are installed. The media talks about these measures as necessary to fight criminal money laundering. But as we’ve said in previous videos, empowering an authority to protect you doesn’t protect you from the authority itself. And government surveillance over individual finance can create many negative and unintended side effects.

Firstly, it’s important to remember that historically, total surveillance and central control over individual finance was not the norm. Whether through cash or barter, individuals have been able to privately exchange value for centuries. Regulations evolved over time as a means to counter abuse, but total surveillance and control over finance is a relatively recent development. However, many developed nations now favour credit or electronic payment systems over cash. Some countries, like India, have even tried to eliminate cash entirely, though often with disastrous results.

While a cashless society seems convenient, it comes with one very big problem; it takes power away from individuals and gives it to large, centralized institutions. With cash, two individuals can exchange value freely. I can invite my friend over for dinner, give him cash in exchange for something, and nobody can really interfere in our transaction. But with cashless electronic payment, the company running the system can monitor every transaction, and even deny transactions it doesn’t approve of. In a worst case scenario, it could even cut a user off from the system entirely. We saw a vivid example of this in 2010, when multiple banks and credit card companies arbitrarily and simultaneously cut Wikileaks off from donations. The power of centralized financial institutions to crush dissent is very real.

The threat of this power is two-fold; on the one hand, government pressure can have critics arbitrarily cut off from all finance. But on the other hand, the threat of being cut off also discourages dissent, and encourages self-censorship.

This is where cryptocurrencies like Bitcoin enter the picture. Being a peer-to-peer system, cryptocurrencies have no central control. Much like cash, they allow individuals to trade freely with each other. But unlike cash, cryptocurrencies allow these trades to happen at any distance. Two users in different countries can freely exchange value, as long as both are connected to the internet. Certainly there is the possibility of criminal abuse, just as with cash. But it also creates a check against the abuse of centralized power.

However, there is one massive Achille’s Heel to many cryptocurrencies; the public blockchain. The blockchain is a completely public ledger of every transaction on the network. Every detail of every transaction is recorded and shared publicly. This means your wallet address, your IP address, account balance, and every transaction are public knowledge. Not even bank accounts or credit card companies share this much information about their users.

So, while cryptocurrencies allow free exchange of value between individuals, the total panopticon of the public blockchain means the association between individuals can still be policed. Cryptocurrencies still need to be exchanged for cash via exchanges, and if the government can monitor every transaction on the blockchain, they can still order exchanges to cut off users they don’t like. If you donate Bitcoin or Ethereum to an opposition party, or a government critic, your account can be flagged by the authorities. If you use Bitcoin or Ethereum to pay for anything personal or embarassing, this can be used to blackmail you. Knowledge of perfectly legal but private activities can easily become a tool of control.

It’s worth noting, this isn’t only a problem from the government. A total public blockchain means anybody can find all of this information easily. But, with specialized surveillance tools like Elliptic, the speed and scope of government surveillance is a much bigger threat.

So what can we do about it? First, we need to understand that totally public blockchains are bad for individual users. Unfortunately, this means that using Bitcoin or Ethereum will always be a risk. We need to start using, promoting, and fighting to normalize cryptocurrencies that embed privacy into their infrastructure, like Monero, ZCash, Dash, or Augur. If you have cryptocurrency in public blockchains, consider moving some of it to more private cryptocurrencies. And finally, reject centralized corporate control and build markets and businesses that respect the privacy of their users. No one person can change the world alone, but each individual can change the way they do business. And if we all change together, then maybe the world can change with us.

This was アノニマスの見解, and until next time… 待ち受けなさい。