US tech firms will probably 'copy-and-paste' Japan's big crypto moves, says bitcoin trading exec

With their fast adaption of crypto, Japan's big tech companies may leave their U.S. counterparts to eat their dust. 

This is what Phillip Gillespie, the CEO of market-making firm B2C2's Japan division, told The Block in a recent interview. Gillespie, a former trader at Goldman Sachs, has his finger on the pulse of all things Asia and crypto. We spoke with him recently to get his take on how the market is developing in Asia, specifically Japan, and the trends he is noticing. 

This has been edited for clarity and brevity. 

Chaparro: What is interesting you about Japan right now?

Gillespie: So what interests me might be a little bit different from what interests most people. In terms of crypto, yeah, it's picked up quite a bit. Different large companies are getting licensing now. The market is picking up. I think overall, in terms of global volume and proportion of volume, Japan has picked up quite a bit.

But that's not what interests me that much. With Japan, if you look at all the companies that are actively getting involved in crypto, it is Rakuten, which is the Amazon equivalent in Japan. GMO is an internet company. LINE is the equivalent of like WhatsApp. All of these companies are pretty much large tech companies that are really getting involved in finance, but doing so via crypto. So, I always wonder when Amazon, or when Facebook when some of these large tech companies will evolve into a financial institution. It seems to be happening in Japan before anywhere else. And it seems like one of the catalysts has been crypto.

For instance, I've spoken to a few of these large tech companies. They're all considering issuing a stablecoin. Still, the issue with a stable coin, you need to have a massive cash reserve, what are you going to do with it? How do they get utility out of the stable coin? What's the business model?

And I think that the Japanese tech companies might be among the first to kind of figure that out. And once they do, it might spread like wildfire, right? Google. Amazon. The U.S. tech giants might say, "Hey, it seems like some of these Japanese-type companies figured it out. They're making XYZ amount of money. Why don't we do the same thing?"

So I mean, it's one thing to have companies like Circle, Gemini, all of these places issuing stable coin. It's another to have an actual NASDAQ-listed large tech company, with a huge balance sheet which has a diversified revenue stream, issuing a stable coin. I mean, one thing is there's no stable coin in the market right now that's really backed by a proper company. They're all like a bunch of crypto companies that are issuing stable coins. It's a bit of a joke, because as crypto fluctuates, you're holding quite a bit of counter-party risk. And that's kind of what's wrong with Bitfinex, right? I mean, everyone's using it because they were one of the first guys to start offering stable coin.

But a lot of people in the market has doubts about Bitfinex. There's a massive amount of counter-party suspicion, right? And I guess that's part of the beauty. Maybe there's a lot of people who want to see a stable coin that's not issued by a proper company.

Chaparro: Facebook is reportedly building out a stablecoin as part of its broader crypto effort. What do you make of this? Will Facebook be able to sprint ahead of the Japanese tech firms you are paying attention to?

Gillespie: I think Facebook is going to have a hard time figuring out what to do with the stablecoins. The reason I keep saying it will be very interesting to see what the Japan does with this is because the Japanese tech firms are different. Take Rakuten for example, if you live in Japan, you can buy equity from Rakuten, you can buy FX from Rakuten. You can get a credit card from Rakuten. It's a little more of a financial institution than Facebook is. If you issued a stablecoin you can use stablecoin to perhaps trade securities that they already have license to trade. They have millions of different licenses to trade. They can trade by bonds, by equity, you can buy options, whatever, you can buy crypto. You also have the payment system that's already hooked in.

Why not have a system where you can have a multi-currency kind of like a debit card and stablecoins a part of it, and then you can actually use that for a payment. It's a lot more established than the Facebook or Amazon in the state-side. That's why I say it's quite interesting because the Japanese tech firms that have already dived into finance quite a bit. Right now, you can't get a Facebook credit card. You can't buy stocks on Facebook. There's nothing you can really do on Facebook other than post pictures, and talk to people, and use your phone.

Yeah, and a lot of this I kind of assumed everybody's on the same pace with me. To remind everybody Japan has gone a step further, the tech companies have gone a step further. That's what I mean by maybe we should pay attention to what happens because if a business model works here, then you know the Facebook executives will sit around and say, "Hey, look at what happened here. This is what we need to do." That becomes a huge catalyst for Google to acquire a Market Maker or Facebook to acquire a payment system or something, in order to copy whatever business model works with the stablecoins. It is my interest, and what I think is an interesting kind of point for people to pay attention to.

Chaparro: You really think Google would acquire a market making firm?

Gillespie: Sure, but have you noticed that one of the biggest market makers, XTX, and Google have moved into the same building in London? The market is there and I don't think enough people are paying attention to it or really understand the moving parts. I wouldn't be too surprised if Google and a few market makers haven't already had conversations, for example, a very high level conversation. Why not? After all the physical proximity is an interesting thing. You see these people in the elevator, so they do know each other.

But the key thing is the business plan. To your point, no one's really figured out the use case and the correct business plan. I think that Japan might be in an interesting situation to figure it out. Once they do, it's a copy-and-paste for US firms. 

Chaparro: What other firms stand out to you in Japan? What about Nomura, the investment bank, aren't they doing something in custody?

Gillespie: In terms of crypto, I think GMO is definitely above its peers. IIJD current is focusing quite a bit on crypto. Line is trying to do more and more crypto and security. I'm not going to even going to consider Nomura as a serious participant. They're not even top seven or eight in my mind. Yeah, I'm sure everybody is trying to do something with [crypto]. I mean, some of these guys spend too much money on the PR, so it sounds a lot splashy.