Welcome!

Summary

This is the first proposal submitted for the Japanese market and for Dash Japan. Dash has been delisted from all Japanese exchanges based on the shared misunderstanding by Japanese regulators, their advisors, and several exchanges that Dash’s blockchain is private, untraceable, and cannot be audited.

Japan is among the largest countries economically (nominal GDP and PPP), and by population size. With respect to cryptocurrency, the island nation is one of the largest cryptocurrency trading countries. The government views cryptocurrency as a legitimate form of payment and it leads the Asia Pacific region and beyond in cryptocurrency regulations. The misunderstanding regarding Dash has serious ramifications beyond the lost growth opportunities in Japan. As Japan is viewed by other regulators as the leader in cryptocurrency regulation, many nations are considering replicating Japan’s regulations and actions within their own countries. The risk is a domino effect across the region could result if more nations begin to effectively ban Dash.  This risk manifested last year with South Korean exchanges replicating the Japan view on Dash. Dash Core Group reached out to South Korean exchanges to reverse a number of proposed delistings over the past year. To resolve this situation in Japan, we are requesting funding from the DAO to engage Japanese lawyers and CPAs for specific services related to engagement with regulators. These services will include, but not be limited to, drafting legal memorandums, demonstrating Dash blockchain is auditable, etc. 


Goals

• To engage with regulators and ultimately list Dash on Japanese exchanges
• Enable Dash as a form of payment in Japan, and grow within the country, have Dash listed on registered crypto asset exchanges in Japan and to gain status equivalent to current BTC, BCH, LTC, etc. within the country
  
• To submit objective factual memorandums written by lawyers and CPAs to The Government of Japan, specifically the Japan Financial Services Agency (JFSA), Self-Regulatory Organizations such as the Japan Virtual Currency Exchange Association (JVCEA), regulatory influencers, and 21 registered exchanges
  

The situation in Japan

Although Japan has been a country with low economic growth rates for decades, it still has the third-largest GDP in the world and is the only G7 member in the Asia Pacific region. Japan is also a country based on values of democracy, respect for human rights and fundamental freedoms, a liberal economy, and compliance with international law. The population is 126.2 million and the financial assets held by individuals are about 16.8 trillion USD, averaging about $133,241 USD per person. 

Japan is the first country to establish a regulatory framework for cryptocurrencies. The cryptocurrency law came into effect in April 2017. By June this year, a revised law will be enforced, focusing on tighter regulations. Japan’s regulations around blockchain and cryptocurrency have received international praise from regulators as demonstrated in June 2019, Tom Neylan, secretary of the FATF, stated that Japan's cryptocurrency legislation was two years ahead of other countries (https://coinpost.jp/?p=93665). The focus on passing and implementing regulations by the Japanese Financial Services Agency(JFSA), which is responsible for Japanese financial administration, is due to the JFSA’s goal to be the global leader in cryptocurrency and blockchain regulation. Cryptocurrency is seen as a strong area for the country’s economic development. However, Japan has kept its focus on regulating the companies that offer cryptocurrencies such as exchanges, instead of the coins themselves. Currently, ownership or use of cryptocurrencies for payments is unregulated in Japan.

As of March 2020, there are 21 registered and licensed exchanges in Japan, however none of these exchanges have Dash listed on their platforms. This means that residents of Japan have no legal way to purchase Dash (The residents of Japan include about 1.65 million foreign workers. The number of foreign workers has increased about eight times in 20 years, and is expected to increase in the future.). Japanese exchanges who desire to list a new cryptocurrency must go through an approval process submitted to the Japan Virtual Currency Exchange Association (JVCEA), a legally recognized Self-Regulatory Organization. This organization in turn reports to the JFSA.

Although there are no laws or guidelines in Japan specifically prohibiting the listing of Dash, JVCEA has issued guidelines that has in effect prevented Dash from operating in Japan. The relevant guidelines  on cryptocurrencies to avoid issued by the JVCEA states:

• “Cryptocurrencies that are extremely difficult to trace transfer records”, 
• “Cryptocurrencies that are difficult to properly audit by a certified public accountant or an audit firm”, and 
  
• “Cryptocurrencies that are likely to be used for the Money Laundering and the Financing of Terrorism." which are prohibited under Self-regulation rules. 
  

Dash has fallen into these categories in the minds of the JVCEA largely due to an existing larger general misconception about Dash carried by many individuals and thought leaders in this space, that Dash is a privacy coin, which Dash Core Group publicly addressed here. Additionally, the lack of awareness that Dash is auditable has been a significant factor to the JVCEA’s view on Dash, due to the Payment Services Act, which requires that crypto asset exchanges and their listed crypto assets be audited by a Japanese audit firm or a certified public accountant. In fact, in 2018 a member of a study group on virtual currency exchange businesses established by the JFSA mentioned Dash, ZCash, and Monero as problematic cryptocurrencies susceptible to use for illicit purchases and money laundering. 

As described in more detail within the document “Dash Complies with the Financial Action Task Force (FATF) Guidelines Including the ‘Travel Rule’”. The current classifications of Dash are patently incorrect and absurd. Since Dash’s transaction rules are identical to Bitcoin, more complex and numerous privacy options exist for Bitcoin compared to Dash, and Bitcoin has been approved by the Japanese regulators, a reasonable person would conclude that Dash should also be whitelisted by regulators given its lower regulatory risk than Bitcoin. 

There are several factors and events that directly led to the regulators’ position on Dash in Japan. These include:

• A member of a study group on virtual currency exchange businesses established by the JFSA said Dash, Monero, Zcash, etc. were very suspicious in terms of AML regulations at a meeting of the study group. (April 2018) 
• A member of a study group on virtual currency exchange business established by the JFSA, said in an Abema TV program, “Dash has traditionally been called darkcoin. It is a virtual currency that was developed from the beginning to do bad things.” (February 2018) 
• A member of a study group on virtual currency exchange business established by the JFSA, said in an interview with the famous economic magazine “Weekly Diamond”: Regulators should consider banning the listing of highly anonymous currencies whose transaction records cannot be traced. For example, Dash is a cryptocurrency that is easy to use for money laundering, and regulators should not overlook exchanges listing such cryptocurrencies. (March 2018) 
• There was a report that Dash was used for money laundering by a Japanese gang together with Monero and Zcash in the article of The Mainichi Shimbun Newspaper. (May 2018) 
• Coincheck has delisted Dash, Monero and Zcash simultaneously, removing any perceived obstacles to attaining a license from the Japanese government. (May 2018) Their judgment spurred the public view of equating Dash with Monero and Zcash.
  
• The Nikkei reported as follows when JVCEA drafted the Self-regulation rules: The association also wants to prohibit exchanges from accepting new currencies that cannot be traced to previous sellers, since such currencies could easily be used for money laundering and are hard to monitor. Highly anonymous coins like Monero, Dash and Zcash could be forced out of the mainstream. (June 2018) 
• An audit firm has listed Dash, Monero, and Zcash in its own publication, as cryptocurrencies that are difficult to audit. (November 2018) 

These above assertions/actions by the working group, Coincheck, and the consulting firm are of course both patently false and highly inaccurate in classifying Dash as a privacy coin. Dash is built on a transparent blockchain and forked from whitelisted projects with no change to transaction rule-sets. Given Japan’s regulatory bodies’ prestige among other nations’ regulatory agencies, we have begun to see a domino effect, particularly in the Asia Pacific Region, as other countries such as South Korea, begin to target Dash for delisting. This was evidenced through announcements from exchanges such as Upbit Korea, OKEX Korea, and Bithumb. Dash Core Group has been working hard to reverse these decisions, raise awareness about the reality of Dash and how it complies with all relevant regulation, however, this domino effect is still a visible threat to Dash’s growth.


What is Being Done to Remedy the Situation

For the past year, I have been working closely with Dash Core Group to remedy the situation. 

• In September, 2019, Glenn Austin, CFO of Dash Core and I met with the JVCEA to present and submit the "PrivateSend Legal Position" document (I did the translation) in person.
• To reverse the decision and opinions of exchanges and regulators, and whitelist Dash in Japan, we have been advised on the following steps: We have been advised by exchanges and other entities, with clear instructions on the first few required steps to change the situation in Japan and whitelist Dash in Japan. These are:

1. It is recommended that legal and CPA memorandums outlining their expert opinions on Dash auditability be drafted and submitted to the regulator authorities
2. Japanese Auditing firm or big 4 accounting firm must audit Dash and submit the report to the regulators through exchanges
   
3. An exchange partner with Dash listed and licensed to operate in Japan, must submit an application, including an audit of Dash in their systems to regulators
   

• We have identified a Japanese law firm well versed and experienced within the cryptocurrency space. We would like to contract them to draft and submit the legal memorandum.  
  
• We require an audit of a partner exchange who can list Dash and is willing to submit Dash for regulator approval. We are currently in progress of identifying an exchange partner to go through this process with.
  
• We are in conversations with big four firms to conduct the audit of Dash
  

Necessity of this proposal

As mentioned above, we have visited and submitted to the JVCEA our "PrivateSend Legal Position". This document has also been mailed to the JFSA department. It is unlikely however, that Dash Core Group and I will be successful in changing the JVCEA’s view of Dash without the support of third parties such as local, professional services (legal and CPAs) as well as exchanges. We need to leverage the credibility of these third parties to resolve the multitude of misconceptions surrounding Dash in Japan. Additionally, one exchange executive has outlined the overall process to reverse the delisting process. This entails submitting memorandums explaining facts objectively to regulators and exchanges. Memorandums by non-stakeholder lawyers and CPAs will be taken seriously by regulators.The memorandums by lawyers and CPAs are opinions based on the firm’s knowledge and experience, but are not based on any actual audits or assurance standards. Therefore, these alone do not guarantee clearing the misunderstanding by regulators on Dash’s auditability nor that Dash will be listed on a Japanese exchange. However, these are part of the overall process the Japanese regulators and exchanges have expressed to us. Without the memorandums, we will definitely not be listed on any exchanges in Japan. Furthermore, an exchange is required to lead the application process for Dash approval by regulators. Exchange partners we are in discussions with to work with Dash Japan and Core Group on submitting the application, require the aforementioned memorandums to move forward.To assist in drafting a memo stating that Dash is fully auditable, we have identified a CPA firm, a company with significant experience working within the cryptocurrency industry.The benefits of resolving this misunderstanding are not localized to Japan or even the Asia Pacific region. Once the misunderstanding has been cleared with Japanese regulators, Dash Core Group and Dash Japan plan on leveraging our success with regulators in Japan to publicly raise awareness about Dash’s auditability and compliance with relevant regulations to regulators and exchanges all over the globe. This misunderstanding has proved to be an impediment in several discussions with partners located all over the globe.Dash Core Group and I will jointly support these parties in drafting these memos as well. 


Deliverables of this proposal

• 1 Legal Memo to submit to regulators in Japan
• 1 Memo by auditors (CPA) on the auditability of Dash to submit to JVCEA
  
• 1 Application with a partner exchange submitted to JVCEA
  
• Dash listing in Japan at least one reputable exchange as soon as possible

Note: Memorandums cannot be made public as they are confidential. However, we will update the community on the progress of the drafting.


About me

I am Yosuke SUDA (https://www.linkedin.com/in/yosukesuda/). I run DashJapan.com, Dash's Japanese website. In March 2017, I began working on spreading awareness and adoption of Dash in Japan under the username Samurai33. To date, I have been updating the community on the situation of Dash in Japan through the Dash Forum (https://www.dash.org/forum/threads/the-situation-in-japan.31816/). I also regularly share information about Dash on my Twitter account, which currently has 4,000 followers as of March 2020. In addition, I currently serve as the moderator on the Discord server for the Japanese Dash community, which holds 6 translators and 30 community members. Finally, I have dedicated over 200 hours in supporting Dash Core Group in their efforts with Japanese regulators. 

My collaborator is Taiki who runs DASH Japan Meetup. We are the Dash Japan Team. We have been working with the Dash Core Group to get Dash listed on Japanese exchanges. Last September, Glenn, Taiki, and myself attended the FIN/SUM, a conference hosted by the JFSA and the Nikkei. We also had the opportunity for direct dialogue with regulators and exchanges. That is mentioned in Q3 2019 Summary Call by Glenn (https://youtu.be/EXS889lZDKg?t=4159).

Dash Core Group has no dedicated staff in Japan. When Glenn came to Japan in September, I made all the appointments to regulators and exchanges. For all of the work and time dedicated to Dash, I have done so as a volunteer without a budget. I have never asked the Dash network for compensation. I live in a city about 300 km away from Tokyo, so my travel expenses to Tokyo are included in this cost. 

Cost

1)  A memorandum by lawyers: $18,000
(This corrects misunderstandings about Dash)

2) A memorandum by CPAs: $9,000
(This indicates that an exchange listing Dash can be audited)

3) Dash Core Group Travel to Japan: $2,100

• Either Ryan Taylor, Glenn Austin, or Omar Hamwi will be required to travel to Japan to meet with regulators and partners
• Based on $1,500 average flight cost to Japan from Phoenix, $50 for meals and transportation, $100/night for a hotel near the government offices, for four days

4) My Travel to Tokyo: $900

• Based on $300 for Round-trip transportation costs from my place of residence to Tokyo, $50 for meals and transportation in Tokyo, $100/night for a hotel near the government offices, for four days

· 423.73 Dash ($30,000 USD @ $70.8 per Dash)· 5 Dash proposal reimbursementTotal: 428.73 Dash@ 2 months - 214.36 Dash per month ($15,177 USD per month)Prices based on CoinMarketCap as of 10:25 am U.S. CT, 3/9/20

How to receive the budget

Proposal funds will be sent to a Dash Core Group wallet who will in turn pay all fees to relevant parties, such as Japanese legal fees, CPAs, travel, etc. Dash disbursed to Dash Core Group, should this proposal pass, will be immediately converted to USD to remove volatility risk. Fees will be paid in USD as there are currently no exchanges in Japan with a Dash/Yen pair as a result of the situation we are working to resolve in Japan. 


Dealing with price fluctuations

Should Dash rise in price following the disbursement of funds, the additional resulting value will be spent on funding the Japanese-English translation team’s fees, and costs related to Dash Japan’s participation in a number of influential blockchain conferences in Japan.  Should the price of Dash decline by over 5%, the remaining amount will be converted to fiat to lock in the price, and the gap in costs will be supplemented by Dash Core Group.

Reporting progress

Upon completion and submission of each memorandum, Dash Japan will notify the community through Discord. I will report it to the community on Twitter and Dash Forum. In addition, I will continue to report on the future situation of Dash in Japan.


Links

• https://bravenewcoin.com/insights/japan-has-the-second-highest-number-of-crypto-traders-in-the-world
• https://cointelegraph.com/tags/japan
  
• https://cointelegraph.com/news/new-study-reveals-countries-with-most-registered-crypto-exchanges
  
• https://usethebitcoin.com/10-countries-with-the-most-bitcoin-hodlers/