The future of Bitcoin is definitely an uncertain one. It’s not known yet whether the unstable cryptocurrency will plummet in value and become obsolete or whether it will instead reach new highs, making it into mainstream use in the future. There are many potential uses for bitcoin, ranging from online shopping to revolutionising public transport systems. However, one of the reasons that bitcoin attracted so much attention in its early stages is that it is a decentralised currency. This means that it’s free from regulation by banks and, as a result, the currency has made transactions around the world, fast, efficient and inexpensive. But is it sustainable for bitcoin to remain this way or does it need to be regulated in the future?
In April 2017, Japan introduced legislation for bitcoin as part of their efforts to reform the country’s tax bills. The intention of this regulation is to prevent users from losses if there was ever a problem with the cryptocurrency. This was introduced after the bitcoin currency exchange Mt Gox collapsed in 2014, causing approximately $450 million to disappear. The exchange, which was based in Tokyo, was responsible for approximately 70% of all bitcoin transactions in the previous year. These steps towards regulation also involved introducing anti-money laundering laws and authorising bitcoin as an official payment method for the first time.
As it has now been established as an official payment method, bitcoin is beginning to be accepted more widely throughout Japan. The table-based payment method AirRegi, which is used in an extensive amount of restaurants and fast food outlets across the country, has begun to accept the cryptocurrency. Meanwhile, popular retailers such as Big Camera and Recruit Lifestyle have also displayed interest in following this move.
Other countries, such as Canada and New York, are both seeking ways to introduce regulations for bitcoin. In 2014, Russia was the first developed country to take steps towards banning bitcoin. More recently, Russia has announced that it will not impose the ban, which could have seen anyone using the cryptocurrency jailed for up to seven years. Instead, Russia is now also seeking ways to legislate bitcoin. China, one of the countries which is leading the way in the use of cryptocurrencies, has recently banned Initial Coin Offerings, to reduce the risk of financial instability in the country.
In the UK, there is still a large grey area surrounding the legal status of bitcoin. It is largely considered as private money, which is exchanged between individuals. For this reason, individuals who are exchanging bitcoin back into sterling are not charged VAT. Additionally, there are currently no anti-money laundering or customer regulations in place at the moment.
It’s a common misconception that the lack of regulation allows businesses freedom and control over their assets. Many experts in the cryptocurrency field consider the lack of regulation to be holding back the growth and mass adoption of bitcoin. Start-up businesses and financial technology developers are limited in their use of cryptocurrencies, like bitcoin, because they haven’t got the safety net which appropriate regulation provides.
As interest in bitcoin grows and people seek new ways to mine it, such as joining mining pools or mining farms, it’s highly likely that Japan’s model for bitcoin regulation will provide a framework for other countries to follow in the future. This is particularly true in countries which are looking to advance their technological growth and expand the number of new businesses being established. An influx of start-up organisations and new businesses using the cryptocurrency is predicted across Japan. It will take time before the world is able to see whether the currency is stable enough to be used on an everyday basis.
Despite this, some people are opposed to the idea of introducing regulation for bitcoin. This is because the very nature of bitcoin means that it is decentralised, making it very difficult to control. In addition, over regulation of the most used cryptocurrencies could impact the current benefits of the decentralised currencies, including the low cost of transaction fees. In turn, this could lead people to abandon the mainstream, regulated currencies in favour of new additions which are in keeping with the original concept, such as Bitcoin Cash.
Whether or not cryptocurrencies will continue to accelerate in growth and use around the world remains an unanswered question. However, Japan is currently leading the way for the introduction of bitcoin regulations.
