Japan signed a law recognising virtual currencies like Bitcoin as a legal method of payment. Even though the bill does not recognise Bitcoin as a currency, it accepted that cryptocurrencies have “asset-like values” that can be used “as payment to indefinite parties for the cost of purchase or rent of items or receipt of services and which can be transferred by means of electronic data processing systems”. The bill will go into effect on April 1.
“Bitcoin will continue to be treated as an asset unless there are future revisions or directives to Japanese tax law,” was noted in Bitflyer exchange.
The bill is also imposing a few requirements on Bitcoin exchanges in the country. Japan government’s Financial Services Agency (FSA) started regulating virtual currency exchanges and operations last year, but according to the new law, they need to be registered with the Prime Minister.
Requirements are also need to be met while processing digital currency exchanges domestically. For instance, is it essential to have a minimum capital of JPY10 million (US$89,430) as well as IT systems capable to prevent theft and loss. Other requirements include stricter KYC guidelines, establishing the system for employee training and internal rules.
The accounting part still remains unclear for Bitcoin adopters in Japan. Nikkei Asian Review reported that current accounting standards in the country do not cover digital currencies, so there is no guidance yet on how to approach cryptocurrency-related transactions for tax purposes.
Chikako Suzuki, a partner at Pricewaterhousecoopers Aarata believes that missing clarifications pose “a risk that companies that hold virtual currency could turn out to have distorted valuations or that huge losses surface suddenly”.
“The Accounting Standards Board of Japan decided Tuesday to begin consideration, expected to take six months, of a framework for treatment of virtual currency,” was stated in the Japanese news outlet.
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29 October 2020