Japan: new law accepts now Bitcoin as legal payment

On April 1, a new law went into effect in Japan allowing for the country’s first officially recognized bitcoin exchange. The creation of a bitcoin exchange has been a long time coming in Japan. 

The law was originally drafted in May of 2016 and amended Japan’s Payment Services Act (PSA) in four ways. First, the law officially recognizes and defines virtual currencies. Second, it allows the official registration of virtual currency exchanges. Third, it requires that virtual currency exchanges submit certain disclosures and undergo periodic audits. And finally, it forces virtual currency exchanges to submit to regulatory supervision by requiring them to maintain books and records, file audit reports, and submit to on-site examinations among others.

Like China, Japan is now impacting meaningfully on the Bitcoin market whenever the third largest economy in the world comes out with a move that causes a change. Now, it is clearer that governments are on the way of recognizing Bitcoin as a financial instrument. But to make the digital currency go mainstream everyday users need to support it as a common practice.

For a big economy like Japan to trust Bitcoin as a payment method speaks volumes. It is a sign that it could be a significant tool that could bring advantages over sentiments that point to negativity.

Japan’s new law has been on debate for months following the collapse of the Mt. Gox Bitcoin exchange. The law’s passing brings Bitcoin exchanges under Anti-Money Laundering/Know Your Customer rules as it is the case in China. The exercise in verification will expectedly increase trust in Bitcoin and probably forestall a recurrence of the Mt. Gox case.

Mt.Gox was once largest cryptocurrency exchange before it collapsed, resulting in a loss of 850,000 coins ($480 million at the time). Mt. Gox had handled around 80 percent of global bitcoin transactions. The exchange admitted that there was a flaw in its system that enabled hackers to steal the coins.

Approximately $1.7 billion of cryptocurrency, including bitcoin, Litecoin, Ripple and other cryptocurrencies, circulated across Japan two years ago. A Fuji Chimera Research Institute study projects this number to reach $9 billion by 2020.