Japan’s Crypto Garage to trial bitcoin sidechain

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Japanese firm Crypto Garage, a blockchain development company, has been granted permission to trial its settlement system using Blockstream’s Liquid Sidechain.

It claims to be the first blockchain-based firm to be given approval under Japan’s regulatory sandbox scheme, and will now conduct a one-year pilot with a group of participating crytpocurrency exchanges, Cointelegraph Japan reports.

Crypto Garage calls its platform Settlenet and it will use Liquid Sidechain “as part of an arrangement allowing exchanges to issue yen-pegged stablecoins and trade against Liquid Bitcoin (L-BTC), Blockstream’s sidechain. It also uses atomic swaps, which allows businesses to make cross-blockchain transactions without manually converting assets. The press release says of atomic swaps: “By utilizing atomic swap technology, “SETTLENET” allows the exchanges to simultaneous deliver LBTC in exchange for the receipt of JPY-Token on the “Liquid Network”. This will enable rapid, secure and confidential transfer of the crypto assets while eradicating counterparty risk.”

In its press release (in English), Crypto Garage said, “This will enable rapid, secure and confidential transfer of the crypto assets while eradicating counterparty risk.” The statement added, “In addition, Settlenet will provide the regulatory authorities with the functionality to monitor any unlawful trade, including money laundering.”

Crypto garage also explained that this development could provide the kind of help the crypto market needs. It said: “The current crypto market faces challenges which prevent the sound development of the crypto market. By enabling delivery versus payment settlement of the crypto assets, Crypto Garage hopes to support the industry to overcome such challenges, and also to accelerate the growth of the overall crypto market. Some of those challenges include the following:

· Underdeveloped market for the exchanges and institutions leads to unstable liquidity and/or price fluctuation

· Lack of uniform trading and settlement platform leads to I) high counterparty risk, II) low confidentiality of trade between the trading parties and III) low visibility of trading for the regulatory authorities

· Reliance on consumer facing crypto exchanges which leads to an increased security risk from leaving crypto assets on exchanges.”

Blockstream launched Liquid Sidechain in October 2018, and it is the first public, production-ready Bitcoin sidechain. As Cointelegraph notes, “this implementation comes at a crucial time for Japan, which has forged a permissive yet strict regulatory environment for exchanges in particular, following several high-profile hacks over the last twelve months.”

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