The FSA (Japanese Financial Services Agency), officially announced that the first Japanese bill related to digital currencies, which recognizes Bitcoin as a method of payment, is now a law since April 1st.
This bill does not consider Bitcoins as a form of Currency or Cryptocurrency and recognizes it only as a form of payment.
The new law clearly states that Bitcoin or any other virtual currency is a method of payment and not a legally-recognized currency.
Unless there are any future revisions or to Japanese tax law, Bitcoin will continue to be treated as an asset and not a currency.
How this Law affects exchanges, Payments, and people using it?
In the context of providers wish to facilitate the exchange:
- Any company or bitcoin exchange providing entity must be registered with the Prime Minister before they can proceed.
- Must have sufficient security and IT system defense mechanisms against loss or theft.
- Must possess a Minimum Capital of 10 million yen.
- Should provide the registration number, fee schedule, and trading address as well, to the users.
- Certain Additional Regulations are also required, such as:
- A public certified accountant or audit firm must audit them at least once every year and submit annual reports.
In the Context of the Bitcoin exchange or It’s trading process:
Bitflyer is the largest exchange in the bitcoin market by volume. Yuzo Kano, CEO of Bitflyer, stated to Bitcoin.com, “Even foreign entities who provide services to Japanese residents will be regulated under the law”.
Bitflyer has raised a total of $35.6 million in funding till today, including the recent investment of 200 million yen from Mizuho Capital, and other investors. Other shareholders are Mitsubishi UFJ Financial Group, Mitsui Financial Group, SBI Investment, Densu Digital Holdings, and GMO.
Kano also spoke about the fact that majority of the people in japan don’t believe in bitcoins, and the trust on bitcoin was lost three years ago. Hence to recover the trust large corporations with their own business use purpose use and agenda will join in, which can lead to a bigger bitcoin-blockchain ecosystem.
Coincheck, another major player in bitcoin exchange, which has been experiencing substantial growth with US$130 million from monthly transactions, and at a rate of 1,000 new signups every day.
Kagayaki Kawabata, Business development lead at Coincheck stated to bitcoin.com that the new bill itself is a progressive bill overall, that will position Japan as the leading Bitcoin country.
However, factoring in the number of requirements, he infers that this law may be a huge barrier for early stage cryptocurrency startups. He adds that “While there are some negative aspects to the regulation, government acknowledging Bitcoin is huge progress. When we look at the development of Bitcoin in the long term, we think the positives overcome the negatives lifting it to the next stage.”
Anomalies related to Accounting:
Present Japanese accounting standards do not address any type or form of digital currencies, which leads to the problem of reporting them appropriately and accurately for Tax purposes.
Due to this, many companies keep their digital currency holdings off record, and while reporting, they classify it as “inventory” on balance sheets. Issuers mostly report them as a liability.
Chikako Suzuki, a partner at Pricewaterhousecoopers Aarata stated that “there is a risk that companies that hold virtual currency could turn out to have distorted valuations or that huge losses could surface suddenly”.
Nikkei Asian Review wrote: “The Accounting Standards Board of Japan decided Tuesday to begin consideration, expected to take six months, of a framework for the treatment of virtual currency”.
What are your thoughts on Bitcoin, and Japan’s bill to incorporate it? Comment below and let us know!