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"In the US, Customer is King. In Japan, Customer is God": An Interview with Joel Edgertonby@ishanpandey
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"In the US, Customer is King. In Japan, Customer is God": An Interview with Joel Edgerton

by Ishan PandeyJune 16th, 2020
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Joel Edgerton is the founder of bitFlyer, the largest and the most trusted exchange in Japan. He talks about the Japanese tech scene in Japan and how bit flyer is disrupting the US market. bitflyer even runs TV commercials in Japan, which you do not see in the US. Security is now among one of the unique selling points for bitFlyers to its global customer base. "In the US, Customer is King. In Japan, the expression is that the customer is god," he says.

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It is fun to speculate on the price of Bitcoin or whatever your favorite asset is, but the real question for our industry is what value are we delivering to our customers. How are we making their lives better, saving them time or money? If a crypto exchange needs a major bull run in Bitcoin to survive, then they have the wrong business model.

I sat down with Mr Joel Edgerton for an exclusive “Behind the startup” interview to talk about the story of bitFlyer, its journey into the international stage and the future of the cryptocurrency industry. In this interview, we talk about the tech scene in Japan and how bitFlyer is disrupting the US market.

1. Hi Joel, welcome to our series “Behind the Startup”. Tell us about the story behind bitFlyer and your journey into the blockchain industry?  

Thanks for having me. I appreciate it. The stereotype of startups in the US is that they are founded in garages. bitFlyer began in 2014 in a bakery in Japan. The founders, Yuzo Kano and Takafumi Komiyama, both previously worked at Goldman Sachs and saw the opportunity in Bitcoin and Blockchain early. The vision they have is to simplify the world with blockchain.

Since then, we have entered the US and Europe and are the only exchange licensed in all three areas. We also have a separate blockchain company with a next-generation enterprise blockchain platform called “Miyabi”.

My background is IT and finance. I have worked in London and Tokyo in capital markets, trust banking, custody, asset management and insurance. In 2006, I started my own company using algorithms based on behavioral economics to help individuals make better-investing decisions.

It was not as successful as bitFlyer, but it was a great experience. I became interested in Bitcoin around 2012, so I was excited to join bitFlyer to bring their technology and a Japanese level of customer service to the US.

2. bitFlyer is the largest and the most trusted exchange in Japan. What’s the story behind bitcoin in Japan, and how is it different from others?

Japan has been one of the leading countries in Bitcoin for a while now. You can walk into a major electronics store and make a purchase in Bitcoin using your bitFlyer account.

The government acted early to create a national legal framework to encourage the industry and protect customers. This makes it much easier to innovate and grow the business than here in the US, where we need to work with all 50 states and the federal government to do the same things.

There is a strong Bitcoin community that has grown through the dark days of the Mt. Gox failure to wide acceptance today. bitFlyer even runs TV commercials in Japan, which you do not see in the US.

3. What experience and working culture does the Japanese powerhouse bitFlyer possess which it’s competitors don’t?

In the US, we have the expression that the customer is king. In Japan, the expression is that the customer is god. This highlights the difference in how customers are treated.

It is this dedication to our customers, coupled with our technology and passion for the business that sets us apart. Obviously, that is a very high standard to live up to, and sometimes we do not live up to it, but it is that standard that we must pursue.

The $500 Million Coincheck hacks occurred in 2018 and that made regulators more strict about committing to the security of the exchanges to protect the interests of investors.

4. What commitments has bitFlyer put in place for the security of funds, and do you feel that security is now among one of the unique selling points for bitFlyer to its global customer base?

Security is absolutely critical, and we spend significant resources and effort to protect our customers. We implemented multi-sig, 2FA, and store almost all customer assets in cold wallets. We have neutral 3rd parties review our systems and processes so we can continuously improve our security.

I think it is important to note that bitFlyer does not try to take shortcuts like many of our competitors. Our 2.5 million customers trust us with their money for a reason. We protect customer money, we do not go offline when the market is volatile, and we do not abandon our customers to avoid regulation. 

5. Regulation is the way going forward for the blockchain industry. How has bitFlyer invested its time into strengthening its relationship with state and federal regulators? What are its benefits and indicators?

bitFlyer was a founding member of the Japan Blockchain Association (JBA) and the Japan Virtual and Crypto Assets Exchange Association (JVCEA) which is the Self-Regulatory Organization (SRO) for crypto exchanges in Japan. In the US, we joined together with Gemini Trust to create the Virtual Commodities Association (VCA) with the goal of developing the first crypto SRO in the US.

We were also the first non-US company to receive the New York BitLicense (fourth overall) in 2017 and currently holds licenses to operate in 47 US states and territories. We have a very respected Chief Compliance Officer in David Zacks, who has experience on both the business side and regulatory side of the industry.

Obviously, we take regulations and protecting our customers very seriously. While regulation in the US is difficult to navigate due to the lack of clarity between states and federal authority, we think it is essential to work with regulators to have common-sense rules that allow for innovation while still protecting customers.

We need to work together to expand the benefits of blockchain technology beyond the core community.

6. From a pure product perspective, what does bitFlyer US offer to retail investors that separates itself from the rest of its competitors?

I think the primary differentiation is that we care about our customers and doing right by them. There are competitors with fancy interfaces, offer 125X leverage and have more coins. However, those are not necessarily in the best interests of the customers.

We focus on a simple interface that allows customers to buy coins easily without wasting their time. We minimize leverage to protect customers from taking on too much risk. We only list coins that solve real problems. There are many things that we can do better, and we love it when our customers work with us to make bitFlyer better.

7. What products does bitFlyer offer to its institutional clients, and what’s the value proposition for them?

Our founders came from Goldman Sachs so our trading exchange, called Lightning, was built for professional traders and institutional clients. We have low fees compared to other exchanges and APIs made for institutional trading. Institutional clients can use the same APIs and tap liquidity in our US, EU and Japan markets.

We also have account managers assigned to our institutional clients to quickly handle any issues and make sure we listen to them and continually deliver value to them. Lastly, we work with institutional clients that want to use entities in the Cayman Islands or Hong Kong to make sure their on-boarding process is smooth and meets all US KYC and regulator requirements with minimal hassle.

8. Do you believe that quantitative easing is going to have an effect on the cryptocurrency market and its curve of adoption?

An excellent question. I have always been more of a fundamental investor rather than a technical trader. I can understand the value of scarcity on the supply side, but what drives cryptocurrency on the demand side, other than psychology?

The logic is that massive increases in money supply will devalue fiat currency relative to scarce assets like Bitcoin and increase their demand. I agree with that logic, but when? Japan has been printing money for decades and is still on the brink of deflation.

I saw a chart the other day comparing US interest rates to the monetary base as a percentage of GDP. The time frame for interest rates rising after
massive currency printing was measured in decades.

It is fun to speculate on the price of Bitcoin or whatever your favorite asset is, but the real question for our industry is what value are we delivering to our customers. How are we making their lives better, saving them time or money? If a crypto exchange needs a major bull run in Bitcoin to survive, then they have the wrong business model.

9. The Coronavirus pandemic has led to a financial crisis worldwide. How is bitFlyer approaching this problem and what opportunities do you see ahead amidst this coronavirus pandemic?

We moved very early to fully remote working, and it has gone well so far. Digitally native companies like bitFlyer already have significant advantages, and the decentralization mantra of the crypto world is another strength. The pandemic has highlighted those advantages even further.

I think remote working will expand significantly, with companies that have cultures that embrace decentralization thriving and companies that don’t revert back to centralized offices. The commercial real estate industry will be hurting for years to come.

Just like necessity is the mother of invention; the invention is the mother of necessity. Satoshi’s blockchain / Bitcoin invention to address the failures of the 2008 financial crisis has created new industries that did not previously exist.

We are still in the early days of this Cambrian explosion of innovation. I do not know how it will look in the end, but the companies that are solving real problems and are passionate about their mission should thrive, and the scams that are leeching off of that innovation should die off.

The one thing I know for sure is that this is a fun time to be in the industry, and I am going to enjoy the journey.

The purpose of this article is to remove informational asymmetry existing today in our digital markets by performing due diligence by asking the right questions and equipping readers with better opinions to make informed decisions. The writer does not have any vested interest in the company. The views in these articles are purely personal and educational; the material does not constitute any investment, financial or legal advice. Please do your research before investing in any digital assets or tokens, etc. Interviewer - Ishan Pandey, Founder Blockchain Research.

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