Financial regulators in Japan proposed the recognition of cryptocurrencies like Bitcoin as legitimate methods of payment on par with fiat money.
On the 23rd of February the Financial Services Agency of Japan submitted legislative revisions that would see Bitcoin and other virtual currencies recognised as legitimate currencies.
This has come about as a result of realizing that virtual currencies essentially fulfil the nation’s definition of the functions of a currency.
Exchanges will need to register
Currently, virtual currencies are recognised as ‘objects’, as such they do not have the same status and are not treated the same as fiat currencies. It also means that they are not subject to any regulation by the Japanese authorities or otherwise.
The submission date for these changes has been set as the current ordinary ‘Diet’ session. The hope is that these changes will be passed before the current term ends. However, the predicted result of the decision is mostly unknown.
If the new proposed definition passes, virtual currencies must serve as a medium of exchange, i.e. they can be used for the purchase of goods and services. Those who choose to do so must also be able to exchange the virtual currencies for legal tender through purchases or trades with an unspecified partner.
All institutions that deal in the business of virtual currencies, i.e. all exchanges and bitcoin businesses, would need to register with the Financial Services Agency to ensure tighter oversight from the agency over the virtual economy.
Consumer Protection
Mostly this has come about as a result of the 2014 collapse of the world’s largest bitcoin exchange at the time, Mt.Gox, as it greatly exposed the lack of consumer protection in the industry and highlighted other issues consumers had been having with missing funds despite deposits.
The hope is that these steps will create a legal framework upon which virtual currencies will be able to spread more quickly and safely, that there will be strengthened consumer protection, and spurred growth in the virtual economy and the financial technology sector.
“Right way to go”
Tomonori Kanda, a financial affairs official at the governing Liberal Democratic party, said:
“There is a long way to go...But we have discussed reform and believe it is the right way to go.”
Another Financial Services Agency official in Tokyo echoed Mr Kanda’s statement, but chose to remain anonymous on account of the sensitive nature of the subject:
“We have not decided anything yet...The way things work here is that any change would have to be approved by parliament first, and then we would work on writing the legislation.”
Oleg Khovayko, lead developer at Emercoin, spoke to Cointelegraph and offered his opinion on the proposed legislation:
“Any way of legitimization is good, since it will make definitions and transparent rules for crypto-related business.”
However, he also added that he feels that it is not important whether cryptocurrencies are treated as currencies, as is proposed in Japan, or as commodities, as is the case in the US. He feels that it is more important that governments show the correct manner in which cryptocurrencies should be treated, thereby allowing for correct accounting of these assets.