After months of debate, the legality of Bitcoins in Japan is finally taking shape, thanks to a new law that went into effect this April 1st which recognizes Bitcoin as a type of payment method, according to local reports. The legislation is one of several efforts made by the government to improve the stance of Bitcoins in Japan following the notorious 2014 collapse of the Mt.Gox exchange which crashed the price of the cryptocurrency.
According to the new legislation, Bitcoin is not yet recognized as a currency, but sort of an asset-like payment method that can be used to purchase items or pay for services via electronic systems. The law also introduced new requirements for Bitcoin exchanges, apart from the ones from last year, when exchanges were asked to register with the Financial Services Agency (FSA) and comply with Know Your Customer (KYC) and Anti-money laundering provisions.
Per the new provisions, Bitcoin exchanges will now have to register with the Prime Minister and secure a JPY 10 million ($89,745) minimum capital. They will also have to set up cybersecurity systems for loss and theft prevention, internal rule and governance systems, as well as conduct regular training programs to their employees.
Apart from liberating the use of Bitcoins, the law also introduces new challenges to companies working with Bitcoin but also existing Japanese laws. Namely, previous reports from 2016 suggested that other legal frameworks might need to be changed to align with the use of Bitcoins, including Japan’s Banking Act, while the current provisions have introduced an accounting problem for Bitcoin companies, as the accounting standards provided by the ASBJ (Accounting Standards Board of Japan) do not cover virtual currencies. Thus, companies are now facing dilemmas as to how to treat virtual currencies, a problem which the ASBJ announced to settle with a new framework that’s expected to be released in six months.