As long as Japan does not fail in what seems to be an effort that is making Bitcoin bigger, the world's top digital currency would always be a success. One latest example is the adoption of the AML/KYC rules for Bitcoin exchanges in the country
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.
Bitcoin price affected
With the recent development in which Japan recognized Bitcoin as a legal method of payment starting Saturday, April 1, the Bitcoin price has seen a steady climb over the $1100 range by the start of Monday.
The recovery from the dip where the Bitcoin price had been over a week ago when the deadlock over the scalability issue had heightened has been attributed to a growth in Bitcoin demand from Japanese consumers after the government passed a law which basically says officially that Bitcoin users will not be taxed directly.
Rather, it brings up the issue of AML/KYC which caused a heated debate. Some users are in favor of it preferring exchanges operating legally so that they can be law-abiding, pay taxes on behalf of users and guarantee some form of protection for users’ money.
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.
Coincheck's Kagayaki Kawabata told Cointelegraph:
"While market cap and usage of cryptocurrency is scaling significantly in past few years, Bitcoin and cryptocurrencies are something that can't be ignored. The Mt. Gox incident took place in Tokyo. This experience I think has made Japan decided to regulate them in order to protect the customers. I think other countries will follow Japan if this new regulation works out."
The AML/KYC process will also serve as a link between the government and Bitcoin which is what many people believe is still missing for the ecosystem to grow into a regulated market.
For Bitsquare's Ken Shishido, the development is a result of years of industry effort in lobbying policy makers and not necessarily the government taking a proactive approach nor wanting to make Bitcoin bigger and better.
Tax implication is not finalized yet but it is a huge deal that consumption tax is now officially exempted, he adds.
From China to Japan and other countries, it is now 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.
Why Japan Matters
Japan does not seem at all worried by the general attitude of some countries to digital currencies like Bitcoin. The country’s level of confidence in Bitcoin is overwhelming despite the negative history it has had with the digital currency.
Based on this level of trust and interest in the currency, the success of the ongoing experimentation will help show how possible legislations can work with Bitcoin.
It will go a very long way to draw other countries that are still skeptical about Bitcoin into the fold as well be a good form of advertisement to the wider global community - especially governments. The legality of the state is always a boost for the justification of Bitcoin.
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.
“Not sure other developed countries will follow suite anytime soon but maybe countries like Singapore, Hong Kong, Estonia, Switzerland and etc. If some countries do recognize it as a legal tender, it will be a game changer. Japan’s legal status is “currency-like property with consumption tax exemption. If one country recognizes it as a legal tender, all United Nations country will need to acknowledge, too.”
One other factor to note about Japan's impact on the Bitcoin price is that when it happens, the price increase tends to be usually real - it would correct at some point but not to its initial take-off point.
Relatedly, one of the countries picking up on a similar move is Mexico which is working on the first draft of a fintech law that will make its central bank define the regulation that will apply to digital assets such as Bitcoin based on two criteria: widespread adoption of the public and the protocols, rules and mechanisms that allow their generation, identification, division and control.