The idea of recognition Bitcoin as a mainstream currency has been realized in Japan as the country passes the law that categorizes the cryptocurrency as a legal payment option within the country. The highly-anticipated law was implemented on April 1, 2017, which coincides with the beginning of a new fiscal year in many countries.
The whole cryptocurrency ecosystem can benefit from the recognition of Bitcoin as a legal payment instrument. The more people will appreciate the new option and adopt the cryptocurrency, the more widespread Bitcoin will become, which will, in turn, drive demand and price.
As of the moment of writing, Bitcoin price has risen up to $1,136. This is due in no small part to the legal recognition of Bitcoin in Japan.
The implementation of a new law concerning the cryptocurrency may require some additional regulation or applicability of regulations governing banks and financial institutions to cryptocurrency exchange platforms. It is obligatory for them to comply with strict anti-money laundering (AML) and Know Your Customer (KYC) requirements as well as with annual audits. Due consideration must be given to meeting the stated capital and cyber security to ensure the highest level of consumer protection.
Now, Bitcoin platforms are seeking ways to follow the new regulations. According to the recent announcement, the Accounting Standards Board of Japan has started working on the creation of an accounting framework for both user and businesses dealing with cryptocurrencies.
Companies and individuals might need some time to get acquainted with the accounting practices, which has raised concerns about legal implications of inaccurate reporting’s/filings due to lack of understanding. As far as Bitcoin and other cryptocurrencies are rather volatile, there are still many concerns among those who are considering making cryptocurrency transactions.
The new developments are expected to drive the cryptocurrency usage in Japan to over $9 billion in the next three years (2020), which is more than five times the 2015’s $1.7 billion worth of cryptocurrencies in circulation.
The increasing popularity of Bitcoin and the blockchain in Japan is confirmed by the fact that Mizuho Capital, SMBC Venture Capital and Dai-ichi Life Insurance Company invested ¥200 million ($1.75 million) in the Japan’s leading bitcoin exchange, BitFlyer.
Prior to the fundraising, Bitflyer had collaborated with the three banks to test money transactions via the blockchain technology provided by the exchange. The trial, which ran within nine months, clocked 1,500 transactions per second on the blockchain, beating the peak speeds of the current wire system.
The Japanese government actively encourages partnerships between financial companies and fintech startups. The country could soon become a new source of financing for fintech developers working on emerging technologies like blockchain.