VALU

» see valu.is as it lived, on the wayback machine

~ the eulogy ~

Both the law that made VALU possible and the law that ended it were Japanese, and that is most of the story. The service let an individual issue something called a VA, a pseudo-share in themselves, and sell it to anybody who wanted one. Payment was in bitcoin. The mechanism underneath was Counterparty, the layer that lets you mint a token compatible with the bitcoin chain, and Takafumi Horie was already running one of those under the name Horiemon Card before any of this had a company attached to it.

Kohei Ogawa had joined GREE in 2011 and spent the following year as a server engineer at its US office. He came back to Japan freelance, worked on several new businesses, and watched each of them stall for want of funding. That was the state he was in when he found bitcoin. Hiroki Nakamura, one of the founders of the agency PARTY, has said the thing started when the three of them happened to meet. The company was set up in late 2016, PARTY and Kazuma Ieiri put money in, Horie took a board seat, and the open-source developer Dan Kogai came on as lead engineer.

The name was VAL for value and U for you. Beta opened on 31 May 2017, Japanese and English, trading between nine in the morning and nine at night. Reuters reported about 12,000 issuers by 21 July. Nakamura said afterward that he had known from the start the service could be destructive depending on how people used it, which is why they ran closed beta repeatedly and why they walked the Financial Services Agency through the features one at a time before launch. Nothing in that preparation covered what happened seven weeks later.

I was thirty-three in 2017, doing engineering work in Ankara, and my read on all of this at the time was through the exchange-and-lira layer that Turkish crypto interest actually ran on. Nobody here was issuing shares in themselves. A social stock market needs a dense public of named individuals with fans who will bid, and Japan had built that on YouTube by 2017 in a way that Turkey had not.

~ the dossier ~

~ the day the floor went ~

Four creators associated with the agency VAZ, the best known of them the YouTuber Hikaru, spent weeks posting things that read as promises to buy back their own VA. Prices went limit-up day after day. Fans and speculators piled in at the top. On 15 August 2017 the four of them sold their entire holdings into that market and pulled the standing buy orders at the same time, and the prices went straight down with nobody underneath to catch them.

Hikaru announced on 17 August that he would buy back every VA he had issued at the highest price it had traded, saying he had never intended to make money from VALU. The company donated all the fee income from the four creators' trades, froze their ability to withdraw, and rewrote the terms of service. On 4 September he stepped down as an executive director of VAZ and went on indefinite hiatus, returning on 18 November.

~ the law that ended it ~

The revised Fund Settlement Law passed at the end of May 2019 and made custody of somebody else's crypto a registered activity, with identity verification duties and segregated asset management attached. VALU's own statement was blunt about what that meant: custody was the foundation the service sat on, and losing it required a fundamental change of business. On 15 January 2020 the company announced that VA trading would stop.

Trading ended on 2 March 2020, bitcoin was returned to holders through the month, and the service closed on 31 March. The refund window was later pushed out to two days before the revised Financial Instruments and Exchange Act came into force that June. A replacement service was supposed to launch on 1 April 2020 and never did. The accounts for the year ending on the closure date show a net loss of 212.75 million yen against total assets of 290.5 million.

~ what it was actually testing ~

The idea has come back under other names since, as creator coins and as social tokens, and it keeps running into the same two things. A share in a person is only worth what the next buyer will pay, and the next buyer is betting on the person staying interesting rather than on any cash the share entitles them to. Meanwhile the issuer is both the company and its largest holder, with nothing preventing them from selling first.

VALU wrote rules about that second problem in August 2017, after it had already happened once. What is worth noticing is that the regulator never shut the service down over the scandal. It closed because of a custody rule aimed at exchanges, which VALU was not, and which it could not comply with anyway.

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