Bitcoin Price Growth, Global Adoption Depend on Japan’s Confidence in Bitcoin

As long as Japan does not fail in what seems to be an effort that is making Bitcoin bigger, the world's top digital currency would always be a success. One latest example is the adoption of the AML/KYC rules for Bitcoin exchanges in the country. Like China, Japan is now impacting meaningfully on the Bitcoin market whenever the third largest economy in the world comes out with a move that causes a change.

Bitcoin price affected

With the recent development in which Japan recognized Bitcoin as a legal method of payment starting Saturday, April 1, the Bitcoin price has seen a steady climb over the $1100 range by the start of Monday. The recovery from the dip where the Bitcoin price had been over a week ago when the deadlock over the scalability issue had heightened has been attributed to a growth in Bitcoin demand from Japanese consumers after the government passed a law which basically says officially that Bitcoin users will not be taxed directly.

Rather, it brings up the issue of AML/KYC which caused a heated debate. Some users are in favor of it preferring exchanges operating legally so that they can be law-abiding, pay taxes on behalf of users and guarantee some form of protection for users’ money.

New law

Japan’s new law has been on debate for months following the collapse of the Mt. Gox Bitcoin exchange. The law’s passing brings Bitcoin exchanges under Anti-Money Laundering/Know Your Customer rules as it is the case in China. The exercise in verification will expectedly increase trust in Bitcoin and probably forestall a recurrence of the Mt. Gox case.

Coincheck's Kagayaki Kawabata told Cointelegraph:

"While market cap and usage of cryptocurrency is scaling significantly in past few years, Bitcoin and cryptocurrencies are something that can't be ignored. The Mt. Gox incident took place in Tokyo. This experience I think has made Japan decided to regulate them in order to protect the customers. I think other countries will follow Japan if this new regulation works out."

Tax issues

The AML/KYC process will also serve as a link between the government and Bitcoin which is what many people believe is still missing for the ecosystem to grow into a regulated market. For Bitsquare's Ken Shishido, the development is a result of years of industry effort in lobbying policy makers and not necessarily the government taking a proactive approach nor wanting to make Bitcoin bigger and better.

Tax implication is not finalized yet but it is a huge deal that consumption tax is now officially exempted, he adds. From China to Japan and other countries, it is now clearer that governments are on the way of recognizing Bitcoin as a financial instrument. But to make the digital currency go mainstream everyday users need to support it as a common practice.

Why Japan Matters

Japan does not seem at all worried by the general attitude of some countries to digital currencies like Bitcoin. The country’s level of confidence in Bitcoin is overwhelming despite the negative history it has had with the digital currency. Based on this level of trust and interest in the currency, the success of the ongoing experimentation will help show how possible legislations can work with Bitcoin.

It will go a very long way to draw other countries that are still skeptical about Bitcoin into the fold as well be a good form of advertisement to the wider global community — especially governments. The legality of the state is always a boost for the justification of Bitcoin. For a big economy like Japan to trust Bitcoin as a payment method speaks volumes. It is a sign that it could be a significant tool that could bring advantages over sentiments that point to negativity.

Shishido says:

“Not sure other developed countries will follow suite anytime soon but maybe countries like Singapore, Hong Kong, Estonia, Switzerland and etc. If some countries do recognize it as a legal tender, it will be a game changer. Japan’s legal status is “currency-like property with consumption tax exemption. If one country recognizes it as a legal tender, all United Nations country will need to acknowledge, too.”

One other factor to note about Japan's impact on the Bitcoin price is that when it happens, the price increase tends to be usually real — it would correct at some point but not to its initial take-off point. Relatedly, one of the countries picking up on a similar move is Mexico which is working on the first draft of a fintech law that will make its central bank define the regulation that will apply to digital assets such as Bitcoin based on two criteria: widespread adoption of the public and the protocols, rules and mechanisms that allow their generation, identification, division and control.

Chuck Reynolds
Contributor

The Recent behavior of Bitcoin

reveals that developmental events around certain nations make huge impacts on the cryptocurrency. The most significant among these nations are China, India and most recently, Japan. With the mainstream adoption of Bitcoin in Japan and the subsequent acceptance of the cryptocurrency by several stores across the Asian country, Bitcoin has responded by its most recent surge in price, rising significantly above the $1,200 mark in the process.

Strength in numbers

Whether positive or negative, news and events out of the aforementioned Asian giants are always well respected by Bitcoin as an entity and the community as a whole.

Michael Vogel, CEO of Netcoins, says:

“China and India represent a significant portion of the world's population and each has a rapidly growing middle and wealthy classes. Both of these countries are also experiencing turmoil with government imposed capital controls, so the importance of Bitcoin is much more apparent to its citizens as opposed to North America, for example.”

One of the major issues that have come up repeatedly within these Asian climes is the attempt of the government to regulate Bitcoin. Earlier in 2017, there were a few significant events and pronouncements by both the Chinese and Indian government concerning the use of Bitcoin and other cryptocurrencies.

The majority of Bitcoin users have seen these government interventions as events that could negatively affect the growth and development of Bitcoin. On the contrary, these efforts by governments to control the use of Bitcoin may be having a rather positive effect on the cryptocurrency.

Governments are indirectly working for Bitcoin

Simon Dixon, CEO of BnkToTheFuture.com, believes that governments are driving demand in Bitcoin whether they know it or not. He continues by exemplifying the developments in India, where the government's war on cash was an attempt to force bank adoption in India. Dixon notes that India has less trust for banks than many other nations so some are experimenting with Bitcoin instead.

In addition to this, Japan has chosen to regulate Bitcoin exchanges which mean traditional financial institutions are now able to offer Bitcoin to their clients bringing in more demand. China has decided to implant tougher regulations on Chinese exchanges driving a huge spike in the peer to peer Bitcoin market in China and eventually more trust in the exchanges when they allow withdrawals again.

Dixon says:

“What is clear is that no matter what the government does, it is driving more and more demand for the two Bitcoin markets — regulated Bitcoins through exchanges and unregulated peer to peer Bitcoin. All these approaches show the rest of the world that government action drives Bitcoin demand in many unintended ways.”

Japan is a pacesetter

Another important factor identified by Vogel which may be responsible for the Asian dominance in Bitcoin is the fact that Asian countries, Japan, in particular, have always been ahead of the curve with mainstream adoption of new technology. Cell phones, mobile gaming, and mobile payments all gained popularity in Asia years before Europe and the US. It seems that Bitcoin is following a similar trajectory.

Chuck Reynolds
Contributor

Legal Status of Bitcoin in India to Be Addressed
at Global Summit by Assocham
 

After the demonetization of 85 percent of the circulating currency in India in November 2016, ASSOCHAM organized the first global summit on Blockchain technology. Now it is all set to hold the second global summit on Blockchain technology with a focus on opportunities and challenges for the Indian economy. ASSOCHAM is a ‘chamber of chambers’ in India having been in existence since 1920 and having in its fold more than 400 industry chambers. The mission of ASSOCHAM is to ‘articulate the genuine, legitimate needs and interests of its members.’ They are also thought of as promoters of new business models.

Going beyond just a nascent technology

While the Blockchain has made a major impact in the world and its potential has been realized and is being released around the globe, in India the situation is still one of considering Blockchain as a nascent technology. The Second Global Summit which will be held in Bangalore on Friday, 21st April 2017 will focus on opportunities and challenges associated with Blockchain technology and explore the future prospects in India. The key discussion areas for the summit are the impact of Blockchain technology on banks, insurance, and financial institutions, legal perspectives and regulation from Bitcoin to Blockchain, applications of Bitcoin and Blockchain and criminal activity, security and data in the Blockchain.

It is expected that a wide variety of people from different backgrounds will attend the summit including company management, telecom and IT sector workers, security and legal heads, Bitcoin exchanges, regulators, bankers, fund managers and etc. Important representatives of the Indian government are expected to be present including Ravi Shankar Prasad, the Minister for Law and Justice and Electronics and IT. PP Chaudhary, the Minister of State Law and Justice and Electronics and IT, Dr. A.S. Ramasastri, Director for Development and Research in Banking Technology and others.

Negative news can be countered by information

In recent days there has been a lot of controversy regarding the status of Bitcoin and other cryptocurrencies in India. This is the result of misconceptions and misunderstanding of what Blockchain and Bitcoin are all about. We talked with Santosh Parashar, joint director and Head-Corporate Affairs and Capital Market Division of ASSOCHAM about the legality of Bitcoin and how this summit could help address these issues.

He says:

“I absolutely agree that in recent days there has been a lot of news about the legality of Bitcoin and other cryptocurrencies in India. Indeed, this is happening due to the lack of related know-how at different levels in the economy. A few illegal transactions that recently came into notice cannot be ignored with reference to Bitcoin and its legality in India. In our first summit organized in March 2017, nearly all such possible negatives related to Bitcoin were addressed. They were not a fairy tale but based on worldwide experiences that may or may not happen in India. Simultaneously, the investments and transactions in Bitcoin are not altogether ceasing to an end due to any such fear of legal status in India.”

Santosh further adds about learning from other countries and the role the summit is supposed to play, “The options available for India to choose from are — learning by practice, learning by mistakes or learning through others. To what extent, the cost of particular learning is affordable should be a subject matter of utmost priority. Certain countries like the US, China, and Japan which had banned Bitcoin earlier and now following the trend of acceptability must have learned through mistakes. This has to be taken care of by the investors as well as the government and regulators in India because it is a matter of economic significance. In the absence of any such legal tender of Bitcoin in India, ultimately opportunity cost is foregone as there is a loss of taxes to the government. Therefore, this summit is expected to address the legal issues, applications, and implication of Blockchain Technology in the light of recent global developments happening.”

India can become a Fintech Hub

India has been known as an IT hub for more than a decade now. The contributions of India’s IT sector can’t be downplayed as the country is the world’s largest sourcing destination for Information technology (IT) industry and accounts for 67 percent of the $124-130 bln market according to ibef. The industry also gives employment to close to 10 mln people. India can capitalize on its IT experience and recreate a similar success story in the Financial Technology (fintech) sector as well. The need though is for a better understanding of the possibilities that reside in this area and for changing perceptions in New Delhi.

The need for a conducive environment

Demonetization was followed by a push for a Cashless India where all the transactions are done digitally. In fact, if India truly does want to go digital, it will have to rely on the emergent fintech sector and try to embrace digital currencies and Blockchain technology.

Santosh points out:

“The traditional technology models used in the financial sector and sub-sectors for operations are becoming inoperative at the same cost. Hence the new cost effective and efficient technology has much scope to become handy. Fintech has gained substantial attention of traditional players in the Indian financial system. However, the participants of the fintech ecosystem require having a conducive environment of collaboration and dynamism. To build a robust fintech ecosystem, the proper mix of innovative and technical skills, CapEx, government policies and regulatory framework could drive fintech as a key enabler.”

F2Pool: We Were Never Against SegWit. Wait…

Earlier today, Wang Chun, the owner of F2Pool, the second largest Bitcoin mining pool in the world, clarified that he was never against the activation of Bitcoin Core’s Segregated Witness (SegWit) on Litecoin.

Chun stated:

“Please let me do Charlie Lee a favor and clarify: I was never against SegWit on Litecoin.”

Just a few hours later, Chun offered a completely opposing stance on SegWit to his previous statement. What are Chun’s intent and motive? During an interview in February, Chun reaffirmed that F2Pool is pushing the activation of SegWit on Litecoin to observe its impact on overall scaling, on-chain capacity expansion and providing an infrastructure for two-layer solutions. At the time, Chun planned to support SegWit on Bitcoin upon the activation of SegWit on Litecoin.

Since then, Chun has emphasized his opposition to the Bitcoin Unlimited software and its team, due to multiple bug exploitations and the software’s instability. However, Chun has since expressed his concern over the Bitcoin Core development team as well.

In a rather conflicting statement, Chun wrote to Cointelegraph’s journalist:

“I've tried my best to love Core. But Core doesn't love me. Now I know Charlie Lee has a backup plan and it is called UASF.”

Chun’s criticism of Bitcoin Core came as a surprise to the Bitcoin community as he previously explained that Greg Maxwell, a Bitcoin Core developer, helped make his decision to support SegWit on Litecoin. It is highly likely that Maxwell introduced the benefits and advantages of activating SegWit and Chun agreed to observe the solution’s effect on Litecoin prior to implementing it on the Bitcoin network.

Currently, Chun is not in support of SegWit on Bitcoin, Bitcoin Core and Bitcoin Unlimited. He went as far as to encourage developers to find an alternative solution to SegWit since the majority of miners are not willing to accept SegWit as a scaling solution. “If the majority of the miners say no to SegWit, developers must find an alternative solution,” Chun said. Over the past week, a new solution called Extension Blocks was introduced by Bitcoin startup Purse’s BCoin. However, the community doesn’t seem to be convinced as of yet that Extension Blocks is the answer to Bitcoin scaling.

Based on the current trend, a user activated soft fork (UASF) is likely, considering that some of the largest businesses and companies within the Bitcoin industry already expressed their support toward UASF. Throughout this month, Chun has changed his stance on SegWit and Bitcoin scaling in multiple occasions. On April 6, Chun stated that he decided to reconsider SegWit on Litecoin. While Chun has been offering ambiguous statements to his followers and to the Bitcoin community, it is still likely that Chun will change his stance on SegWit on Bitcoin if the solution is activated properly on Litecoin.

Chuck Reynolds
Contributor