A bill to amend Japan's Banking Act has finally come to fruition, recognizing Bitcoin and other cryptocurrencies as legal tender. The bill has far-reaching repercussions for the digital currency world as well as the way that cryptocurrencies can be traded and exchanged. The Banking Act was modified after a long process of debate and dialog which saw proponents of digital currencies arguing on their behalf. Now, after months of discussion, the bill has come into effect as of the beginning of April.
Virtual Currency Act
Section 3 of the bill has been modified to including wording on virtual currency and is being called the Virtual Currency Act, according to reporting by Brave New Coin. Digital currencies like Bitcoin have finally received definition and recognition as a means of payment by the Japanese government.
The Banking Act's Payment Services Act has also moved to define a digital currency as "property of value," meaning that it is usable for payment in the broader marketplace and that it may be bought or sold. At the same time, the Japanese bill distinguishes between digital currencies like Bitcoin and "electronic money." Digital currency, in this case, is not issued by a specific entity and may be used by any accepting individual, while electronic money can be linked to a specific issuer and can only be used by that issuer or persons specified by the issuer.
Along with the recognition of Bitcoin and other digital currencies is the stipulation that profits from trading of those currencies may be considered as "income from business activities or miscellaneous income." This makes Bitcoin subject to various taxes, including capital gains tax. Nonetheless, the buying and selling of digital currencies will no longer by subject o the 8% consumption tax common to traditional currencies in Japan. This change will take effect on July 1 of this year. Analysts see digital currency taxation as an ongoing and evolving process in Japan. It's likely that there will continue to be changes to the account and regulatory standards associated with digital currencies to come.
Bitcoin Exchange Rules Change Too
At the same time, Bitcoin exchanges are shifting in Japan as well. The new bill will require exchanges to maintain stricter "know your customer" processes. Customers of these exchanges must now respond to a series of questions regarding their profession, their trading intentions, and similar areas of inquiry. Customers must also provide identification documents to verify their identities and physical addresses, something which provokes the appeal of digital currencies as anonymous and unregulated. Digital currency exchanges must also face new regulatory requirements, including liquid capital minimums and IT system security checks. While some of these processes and rules may make proponents of digital currencies frustrated, others see them as necessary growing pains for these currencies to be able to exist and thrive in the wider financial world.