According to Japan’s Financial Services Agency, on April 1, 2017, the country will begin recognizing bitcoin and other forms of virtual currency as a form of payment pursuant to a recently passed law. The law also places more stringent requirements on exchanges such as cybersecurity and annual audits. The decision comes after months of debate and increased pressure on how bitcoin exchanges are to be regulated.
In 2013, the now-defunct Tokyo-based Mt. Gox bitcoin exchange collapsed in a $460 million dollar catastrophe that sent a shockwave of panic in Japan and around the world. As a result, in May 2016, Japanese lawmakers passed a bill that specified that all “virtual currency” exchanges must be regulated by the Financial Services Agency. The law that was just recently passed is the latest effort made by the Japanese government to improve public trust of virtual currencies.
However, current Japanese accounting rules lack accurate guidance on how to specifically handle digital currency payments. This leaves many companies in the dark, as holders of virtual currencies can claim them as assets, while issuers can claim them as liabilities.
"There is a risk that companies that hold virtual currency could turn out to have distorted valuations or that huge losses surface suddenly," said Chikako Suzuki, partner at PricewaterhouseCoopers Aarata.
According to Nikkei, the Accounting Standards Board of Japan has begun to develop a framework for the management of virtual currencies, but the organization is expected to take at least six months to create a practicable accounting method.
ETHNews will update this story as more information develops.