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Biz / TechFriday, July 7

Competition Gets Real

The number of virtual currencies around the world is surging. In Japan, some are giving, Bitcoin, a run for its money. NHK World's Keiko Tomura reports on the rising competition in the digital currency business.

"I own several of the most popular currencies, including Bitcoin and Ethereum," says one user.

"Just like there are Windows and Apple computers, having competing virtual currencies is a good thing," says another.

It is estimated there are now at least 700 virtual currencies. As recently as January, Bitcoin was dominant, accounting for nearly 90 percent of the global market. But rivals like Ethereum and Ripple have rapidly caught on. The company behind Ripple is working to make inroads in Japan.

It created a consortium last year that now includes 59 Japanese banks. Together, they're developing a new settlement system. It would be the first large-scale platform of its kind in the world.

The system would eliminate the need for intermediate banks to process transactions. That would cut banks' costs by an estimated 30%. Ripple hopes its currency will someday be added to the network, enhancing its legitimacy.

"Using Ripple on the system would bring down costs by another 30%," says the CEO of SBI Ripple Asia, Takashi Okita. "We want to spread our transaction system, and also make our virtual currency more attractive at the same time."

When we want to get our hands on virtual currencies like Bitcoin or Ripple, we buy them from exchange companies that deal in them. Now, the competition among those companies is heating up.

For exchange companies, partnering up with businesses is the key to success. As more businesses accept payment in virtual currencies, the more likely consumers will be to use them.

One exchange company held a seminar in a bid to attract new partners. Officials highlighted the company's low fees and its secure system.

As it works to drum up business, the company is looking to tourists from China. They believe the Chinese have a lot of Bitcoin to spend. That is because last year, they were the currency's biggest investors.

The exchange company plans to launch a website on the major Chinese social networking site Weibo. It will use it to promote its Japanese partner businesses to Weibo's 700 million users.

It will also start businesses in Hong Kong and Shanghai. The president says it's all part of his broader strategy.

"We aim to handle 10% of the trade in virtual currencies around the world," says Genki Oda, the president of BITPoint Japan.

Right now, it's estimated that there are over a dozen exchange companies in Japan. Some experts say that's too many.

"Businesses will have to differentiate themselves through their services, or by spelling out their merits," says Kazuyuki Shiba, the Principal Economist for the Institute for International Monetary Affairs. "Some will be weeded out, and others will become major players."

It's still early days in Japan's virtual currency industry. Among businesses in the field, the race for survival is already on.