The Strategist

Japan recognizes Bitcoin as a functional currency

02/23/2017 - 13:48

New Japanese law essentially equates Bitcoin and other cryptocurrencies to traditional money and makes these means of payment with legal status. The new order enters into force in April this year.

BTC Keychain
BTC Keychain
"In June last year we started to work on new version of the Law on Payment Services, which determines basic regulations of the virtual currency. Detailed plans and management regulations were published in December, and public hearing of the bill ended on 27 January. The new regulation will come into force in April," - said Ken Kawai, consultant of Anderson Mori & Tomotsune.

The new law will legalize usage of cryptocurrency for settlements and moving digital assets between the companies and individuals. Besides, it will allow banking institutions to launch new payment systems and simplify procedure of buying IT-companies.

The original bill was introduced in the spring of 2016 and, among other things, provided regulation of cryptocurrency exchanges. The paper assumed their mandatory registration and their reporting to Japanese Financial Services Agency (FSA).

Operations with cryptocurrency are associated with a number of strict requirements. Thus, companies will need to have at least $ 100,000 in reserve currency, report regularly to the government and pass an external audit of the tax office.

In addition, companies will have to pay a one-time fee of $ 300 000 to obtain a license to conduct such activities. In case the license is denied, the money will not be returned.

Lawmakers say that such stringent requirements are meant to protect consumers' rights from fraudulent schemes involving Bitcoin. However, critics argue that the new rules will oust small Japanese companies that already work with cryptocurrency. The initiative is also associated BitLicense, recently introduced New York, which has forced a number of companies and start-ups to leave this jurisdiction.

At the end of last year, Liberal Democratic Party of Japan has prepared a bill to abolish tax on sale of Bitcoin and other cryptocurrencies. It is assumed that the grace period of transition will begin in June. The sales tax, which currently numbers 8%, will be completely canceled by July.

Today, the Asian country is the world’s second largest market for Bitcoins operations. Number of consumers of digital currency has increased from 14 thousand people to 76 400 thousand only in the period from April to December 2016. Most retailers already accept Bitcoin as a means of payment.

Japanese government hopes that legalization of Bitcoin will boost popularity of the digital currency. However, such an "affection" may result in significant financial risks.

Cautious attitude of the international community and the shaky political situation in the world often derail Bitcoin’s course. For example, recent intervention of the Central Bank of China in Bitcoin currency platforms’ activity collapsed price of the cryptocurrency.