Japan’s government was once seen as being at the forefront of crypto activity. But as we enter 2019, things are slightly askew in the Land of the Rising Sun.

A number of highly publicized and hugely damaging hacks on exchanges, most notably the attack that drained 58 billion yen ($540 million) from Coincheck’s coffers at the start of 2018, meant that last year the Japanese Financial Services Authority (FSA) didn’t issue a single one of its cryptocurrency licenses.

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At the same time, the value of Bitcoin has plummeted, leaving many firms, whose business models were largely predicated on the massive volatility of cryptocurrencies, struggling to maintain the same levels of cash that were flowing into their accounts in late 2017 and the first couple of months of last year.

Can’t Stop Crypto

Despite all of this, the cryptocurrency industry shows no signs of slowing down in the country.

For one thing, there are still close to 200 firms looking to get regulatory approval from the FSA. Messaging application Line and MUFJ Bank are thought to be amongst the firms hoping to get a thumbs up from the Japanese regulator.

The FSA, however, may be about to make things tougher. According to the Japan Times, the regulator may introduce a number of rules that are very much akin to existing retail trading laws in the country.

For example, adverts that promote cryptocurrencies as a means of getting rich easily may be banned. Exchanges will also have to implement stricter know-your-customer (KYC) procedures, and there will be caps on leverage offered to traders.

All of that leaves Japan, much like the rest of the cryptocurrency industry, in a somewhat paradoxical position.

People are still keen to enter into the space, but markets are tanking. Companies want some regulation but the government, based on past experience in the industry, may be too heavy handed and stifle innovation.

Whatever happens, it’s going to be an interesting year in Japan’s cryptocurrency industry.