Warnings of a potential “hard fork” in the blockchain shook the world of Bitcoin users, but we’re all flying high as values climb following Japan’s legal recognition of it as a valid payment method. A new law went into effect as of April 1st and just 3 days in, “Bitcoin trades up 2.8% at $1,133 a coin as of 7:08 a.m. ET on Monday”, according to Business Insider.
This law doesn’t classify virtual currencies such as Bitcoin, to be an actual currency, but rather an asset. It’s designed to enforce the regulation of exchanges by the Financial Services Agency (FSA) and require them to register with the Prime Minister. Proper regulation involves anti-fraud and anti-money laundering processes coupled with yearly audits.
Nikkei Asian Review wrote, “Under current Japanese accounting rules, holders of virtual currency can justifiably treat it as inventory on their balance sheets, while issuers can mark it down as a liability. But accounting standards do not specifically address digital currencies, leaving companies without guidance. Many simply leave such currency holdings off their books. Right now, there is no settled method of accounting for their use or changes in their value.”
In order to be recognized as a currency, there must be rules in place for tax reporting. As this is not yet the case with Bitcoin, it will be viewed as an asset until such framework is introduced.
Sources:
‘Bitcoin spikes after Japan says it's a legal payment method’, Jonathan Garber, businessinsider.com, April 3, 2017
‘Virtual money poses accounting dilemma for Japan's early adopters’, http://asia.nikkei.com, March 29, 2017