The world’s largest experiment in utilizing blockchain-based networks to pay for things is about to start.

Most payments in the planet’s third biggest economy involve paper bills and metal coins. That places Japan far apart from China and South Korea, where various”cashless” digital payment schemes dominate, in addition to the West, where credit and debit cards are much more popular.

That means the nation also has a lot of ATMs–likely over 200,000–as well as cash registers and fleets of automobiles for transferring money around. It all adds up to an estimated $18 billion annually in costs, most borne from the financial sector.

Next year, hundreds of thousands of foreign visitors–from countries where credit cards and digital payments are second nature–will descend on Tokyo for the Olympics. They’re expected to spend billions of dollars during the event, and Japan’s financial system simply is not equipped to manage it. Hundreds of millions could be left on the table.

In August, the authorities announced plans to provide tax breaks and subsidies for companies that get on board. And while everything from credit card payments to transactions using QR codes would qualify, a number of the country’s largest financial players think the way to wean Japan off cash lies in the technology that conducts Bitcoin.

If they pull it off, then it may be the quickest and most powerful consumer payment system to date. They claim that in tests it has been able to manage more than a million transactions per second, with every single transaction confirmed in two minutes or less, and say it could eventually reach 10 million trades per second. (Visa’s credit card system, in contrast, handles several thousand transactions per second. Bitcoin tops out at approximately seven transactions per minute, and each trade can take around an hour to verify.) The system is designed to deal with all types of payments, from automated highway tolls to payment-card swipes to in-app purchases.

Mizuho Financial Group, a large holding company, has been experimenting with blockchain technologies for several decades as part of a project dubbed”J-Coin” and plans to release its own digital money for retail payments in March. SBI Holdings, a big financial-services company, says it’s building its own token, too for retail payments, called S Coin.

The bet these businesses are producing is that Japan’s society is ready to begin using digital money. It is relatively technologically savvy, cryptocurrency trading has been uniquely popular in the country for years, and Japan’s financial regulators are more acquainted with blockchain technology compared to any others on the planet. With the government’s pressure to go awry, and little competition in credit cards and other forms of e-payment, Japan could leapfrog the technology underlying today’s electronic payment systems and proceed directly to blockchains.

If the experiment works, the country’s economy could be remade. Everything from enormous transactions between banks to small retail purchases could be performed with hardly any delay and in a fraction of the current price; even today’s credit cards could be slow and expensive by comparison.

In the process, Japan will become the planet’s biggest test bed for the decade-old notion that a cryptographic ledger and a network of computers can be used to create an electronic form of cash. It might even recover its position as a worldwide leader in both technology and finance –a status it has not enjoyed for decades.

The narrative of how it got to the moment, however, begins with a catastrophe.

The heritage of Mt. Gox

Longlong ago in cryptocurrency time–that is to say, between 2010 and early 2014–Tokyo-based Mt. Gox was the global online platform for buying and trading Bitcoin. In 2013, it accounted for 70 percent of all Bitcoin trades. When hackers made off with $450 million worth of Bitcoin from the exchange, causing it to collapse, the shock waves were felt globally.

The disaster was particularly traumatic for Japan, recalls Aya Miyaguchi, who at the time was working for Kraken, a US-based exchange that was one of the few competitors to Mt. Gox. “For the most part, people did not have any idea about Bitcoin,” she states. When the news of the collapse broke,”many in the nation panicked,” she states, and the Western press panned cryptocurrencies.

This worried Miyaguchi, a native of Japan who transferred to the US 10 years back and today heads the Ethereum Foundation. “I believed the entire ecosystem could be at risk without proper information and education,” she says. She felt a responsibility to help educate investors, authorities, and the public about cryptocurrency and blockchains.

Only a month later Mt. Gox’s meltdown, Miyaguchi met with Mineyuki Fukuda, a powerful lawmaker in Japan’s ruling party who had been given the task of figuring out how to govern the technology. She was struck by his foresight. “He watched this technology as bringing a possible competitive edge to Japan,” says Miyaguchi. “We talked about how we could use crypto for its Tokyo 2020 Olympics.”

Fukuda wasn’t behaving in a vacuum. The government was on the lookout for new industries in which the country could compete. Policymakers were particularly concerned about how Japan had fallen behind China in fintech, states Thomas Glucksmann, a former Mt. Gox employee who currently runs Asian corporate partnerships such as Diginex, a Hong Kong–based consulting company focused on blockchain technology.

Fukuda decided not to slap down the cryptocurrency business following the Mt. Gox collapse, but to cultivate it. Instead of immediately creating new guidelines for blockchain engineering, the authorities set an industry-led self-regulatory business. Eventually, Japan gathered out the world’s first (and still only) licensing regime for cryptocurrency markets, that went into effect in April 2017.

The authorities toughened up licensing, slowing new approvals to a halt; Coincheck, currently under new direction, eventually got its license just this month.

Regulating cryptocurrency without hindering innovation is a challenge for many authorities. However, Japan seems to be striking a pretty good balance. After the Coincheck incident, the FSA”studied quite difficult regarding cryptocurrency and cybersecurity” and wound better educated than most consultants in the market, says Oki Matsumoto, chairman and managing director of Monex, Coincheck’s new proprietor.

There is at least one more reason to consider blockchain-based cash can succeed in Japan: retail investors that there currently love crypto.

Japanese traders accounts for more than half of global margin trading in the foreign exchange market. Of late, they’ve expanded to cryptocurrency trading, benefiting from Japan’s bustling (and now regulated) exchange spectacle. It is difficult to pin down the Japanese cryptocurrency market’s exact dimensions, but it’s become Asia’s largest market since China clamped down trading in 2017. Analysts at Deutsche Bank state Japanese retail investors turned into a huge reason why Bitcoin’s price shot up to almost $20,000 in late 2017.

Of course, cryptocurrency trading is popular in several countries, yet it is not used much in retail payments anywhere. Why should Japan be another? Its retail sector is decidedly low-tech: most stores do not even accept debit or credit cards. To shop on line, individuals typically print a bar code in your home and take it into a convenience store, where they pay in cash.

On the flip side, they aren’t completely reluctant to electronic payments. Prepaid card services like Suica, which are sold by the country’s major railway firms, are very popular. Grocery and convenience stores tend to take Suica cards, too. “It is an extraordinarily technical society, and a society that’s very interested in transacting digitally,” he says. Given that the government’s push to go cashless fast,”it is a special opportunity at a unique time.”

But even if that is the case, why blockchains? Today’s cryptocurrencies are normally volatile unless they’re backed by fiat money in a bank account. They are difficult to use and maintain protected from hackers, and blockchain trades that turn out to be deceitful can not be reversed. Third-party services like exchanges can have big security issues, as the Mt. Gox and Coincheck hacks showed. And the most popular blockchains are slow and require masses of computing power to fasten the ledger, which gives them huge carbon footprints.

The systems Japan’s banks are constructing could change that. MUFG’s blockchain will run on Akamai’s servers. The company is skilled at building proprietary algorithms to deliver web content to users around the world, its core industry. That expertise easily equates to running a community that is more energy efficient, faster, and more economical to operate than a people blockchain, Champagne states. So much so, MUFG believesthat payments too little to make sense on conventional credit card networks will probably be viable.

Will people in Japan really ditch their money for blockchains, though? Yoriko Beal, cofounder of HashHub, a co-working area for blockchain startups in Tokyo, is doubtful. The prevalence of Suica cards shows that it’s not outside the realm of possibility. But she thinks it is about usefulness, not on the underlying technology. Suica cards are extremely helpful, so people embraced them, she states:”If MUFG and Akamai are so certain that using blockchain can reduce prices a lot in comparison to, for example, with metro cards, it might happen.”