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The first use of colored belts to denote rank was by Jigoro Kano when he was developing judo. Back then, I believe there was only two belts -- white and black. This was around the late 1800s, so compared to the long history of martial arts, colored belts are a recent innovation. The belt system was first adopted by other Japanese arts such as Karate, and then by Korean arts influenced by Japan such as TKD and Hapkido. Most schools today that award colored belts can trace lineage back to a Japanese style (e.g., BJJ) or Korean style (most of which themselves trace lineage to Japanese styles, at least in part).
There are some Kung Fu schools that award colored sashes, and a few non-Asian martial arts that do as well (I've heard anecdotally that some Krav Maga schools do), even though they do not have a Japanese lineage. I think this is primarily for pedagogical reasons, which was one of the same reasons why the Japanese arts implemented them. Another reason was probably the importance of hierarchy and junior/senior relationships in Asian society.
Wrestling, boxing, and other Western arts had a very different development history from Asian martial arts. One major difference is that learning Asian arts tends to be very systematized, with different requirements for advancing, different forms, etc. While I suppose you could re-organize wrestling or boxing into such a fashion, historically that's not how it's been taught, so it doesn't lend itself well to a belt system.
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