Bitcoin has finally gained the recognition of a mainstream currency along the lines of other fiat currencies. The privilege follows the implementation of a new law in Japan which categorizes Bitcoin as a legal payment option within the country. The much-awaited law went into effect on April 1, 2017 (beginning of a new fiscal year in many countries).
- With the new law’s implementation, Bitcoin exchanges will also come under additional regulatory scrutiny.
- The recognition of cryptocurrency as a legal tender also means the applicability of regulations governing banks and financial institutions to cryptocurrency exchange platforms.
- They will be required to comply with strict anti-money laundering (AML) and Know Your Customer (KYC) requirements, along with annual audits.
- Other requirements include meeting the stated capital and cyber security requirements to ensure consumer protection.
- The recognition of Bitcoin and other cryptocurrencies as legal payment instruments is good news for the global cryptocurrency ecosystem. Adoption of cryptocurrency is expected to increase among people, which will, in turn, drive demand and price.
However, reports indicate that the cryptocurrency platforms are still trying to figure out ways to achieve compliance with the new regulations. Recognizing the exchanges’ needs, the Accounting Standards Board of Japan has announced that it has started working on creating an accounting framework for both user and businesses dealing with cryptocurrencies.
Since its inception in 2008, Bitcoin has grown into a technology, a currency, an investment vehicle, and a community of users.
What is Bitcoin?
Since anything digital can be copied over and over again, the hard part about implementing a digital payment system is making sure that nobody spends the same money more than once. Traditionally, this is done by having a trusted central authority (like PayPal) that verifies all of the transactions. The core innovation that makes Bitcoin special is that it uses consensus in a massive peer-to-peer network to verify transactions. This results in a system where payments are non-reversible, accounts cannot be frozen, and transaction fees are much lower.
Where do bitcoins come from?
Some users put their computers to work verifying transactions in the peer-to-peer network mentioned above. These users are rewarded with new bitcoins proportional to the amount of computing power they donate to the network.
Who controls Bitcoin?
There is no central person or central authority in charge of Bitcoin. Various programmers donate their time developing the open source Bitcoin software and can make changes subject to the approval of lead developer Gavin Andresen. Cryptocurrencies and how it might impact those making cryptocurrency transactions.
What is a Blockchain?
Bitcoins are used for electronic purchases and transfers. One can use bitcoins to pay friends, merchants, etc. Every single purchase is immediately logged digitally (on computers) on a transaction log that tracks the time of purchase and who owns how many bitcoins. It transaction log as an audit trail: it contains every single piece of information of every bitcoin transaction. This digital transaction log is called 'Blockchain'.