All year we have chronicled the various ways nation-states have chosen to mis-categorize and malign Bitcoin. The influence of fear, corporate interests, confusion, or the illusion of financial terrorism has caused many a short circuit when it comes to Bitcoin, and official government responses have run the gamut.
Russia and Bangladesh have agreed to ban it outright. Canada is taking a more deliberate and thoughtful look at Bitcoin under the tutelage of legendary Bitcoin wizard Andreas Antonopoulos. Ecuador is trying to head off Bitcoin through a digital version of their fiat currency. And China can’t decide if it hates Bitcoin because the citizens want it, or because they can’t control the market by force. Now Japan has weighed in on the matter, and their response to Bitcoin may surprise everyone.
As originally reported by Kevin Cruz, Japan has taken the most unexpected of government stances on Bitcoin. If any nation should have a bone to pick with Bitcoin, it should be Japan, given the Mt. Gox bubble burst quite loudly on their watch within the Shibuya, Tokyo’s Cerulean Tower. Over 800,000 Bitcoins were embezzled, lost, or stolen by the time Mt. Gox closed it’s doors in February and filed for bankruptcy. An estimated US Dollar value of almost half a billion dollars in Bitcoin (at that time) had vanished. Japan was caught in the crossfire of this epic exchange failure, the largest in Bitcoin history, and many of it’s citizens were seriously affected, and still have not recovered. Yet, Japan doesn’t seem to hold a grudge. In fact, it seems they see an opportunity that many nation-states currently are too blind or confused to see.
Japan is officially a Bitcoin friendly country
What Japan deems fit in Bitcoin’s case is to allow it to be regulated from within, without direct government influence or oversight. Japan seems to have recognized Bitcoin’s unlimited financial and technological potential, and has confidently asked Bitcoin community members to form a self-regulatory authority. It will be called the Japan Authority of Digital Assets (JADA). JADA is supported by Liberal Democratic Party of Japan (LDP)’s IT committee. There is no proposed Japanese government regulation of JADA. Membership includes the Kraken Exchange.
Goals for JADA going forward include:
- make AML and security guidelines
- audit exchanges pursuant to the above guideline
- research the bitcoin business
- have discussions with governmental offices
- have discussions with digital currency companies and digital currency related organizations
- hold digital currency events
- help new digital currency companies
- provide consultation regarding digital currencies
“LDP would like to make Japan the most Bitcoin friendly country,” says So Saito, legal counsel for JADA. “The Bitcoin industry is still quite young and there are many new startups. If we require high standards for entry to JADA, small companies may not be able to join. However, if we require low standards, others (consumers, banks and so on) will not trust JADA, and Bitcoin. Balance is always important. Bitcoin has huge potential and many new companies enter the industry. I expect more than 100 companies will be members of JADA in three years.”
Back in March, just after the Mt. Gox debacle, Japan ruled that banks will be separate from Bitcoin by regulation, as Bitcoin would not be officially deemed a bond or a currency. Any “company” that sells Bitcoin would be subject to a 8% “Consumption Tax”. Individuals who trade Bitcoins, on the other hand, would not be so taxed.
This pragmatic approach, where those who know the protocol best will manage its growth, at least initially, should be applauded by the Bitcoin community. The Japanese government would be plenty justified to take a hard-line approach to Bitcoin, even if it suffered nothing more than a bank failure, which is commonplace with fiat currencies. The overreaction of other nations may have given Japan an opportunity to leverage the technology, and help it work within their highly technically advanced society as an asset, not an innovation to fear.
Japan’s economy is in dire straits, with a gross government debt-to-GDP ratio of almost 238% dwarfs even recently insolvent Greece. The government has said they will double the fiat currency supply of yen, creating a textbook situation of hyper-inflation going forward. Bitcoin may be seen as a shot in the dark. An economic project they can nurture to maybe someday use to get out of their chronic mismanagement through the classically flawed Keynesian economic model. Anything is better than where they’re headed financially. When other nations take a step back from “The Future of Money”, Japan steps forward. Bravo!
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