Digital currencies have become a legal payment method in Japan. A new legislation makes Bitcoin, Ripple and other digital currencies legal money. The Accounting Standards Board of Japan will create a framework to help understand how digital currencies would fit in the accounting sector. This process would take six months.
Japan has failed to provide the guidelines related with the accounting process when dealing with cryptocurrencies. Russia Today reports that many companies are worried about it. Chikako Suzuki, partner at PricewaterhouseCoopers Aarata, stated there is a risk that companies that have virtual money could have distorted valuations or that huge losses appear.
Around $1.7 billion of cryptocurrency was in circulation in Japan two years ago. This includes digital currencies such as Bitcoin, Ripple, Litecoin and others. Fuji Chimera Research Institute believes cryptocurrency circulation will keep growing and reach $9 billion in 2020.
History of virtual currency in Japan
The laws that have come into force in Japan were drafted in 2015 and passed in 2016 after a year of negotiations. There were doubts about the legal status of virtual currency because of a huge financial scandal and the collapse of the Tokyo-based Mt.Gox Bitcoin exchange. This company was once the largest exchange service for the cryptocurrency. The virtual money giant collapsed in 2014 when 850,000 digital coins went off its digital vaults. Those digital coins were worth $480 million in that moment.
The company was a key player, it dealt with around 80 percent of worldwide bitcoin transactions, but there was a bug in the system that allowed hackers to steal the coins. New measures have been taken to avoid this, the new laws state that all virtual currency exchanges have to be regulated by the Japanese Financial Services Agency. They have to be registered with the financial watchdog and verify the identity of customers that open accounts.