The Japanese Financial Services Agency (FSA) is set to hold an official meeting by the end of 2016 to end sales tax on Bitcoin. If passed, it will reduce prices at Japanese exchanges by 8%. National News Channels in Korea and Japan praised the FSA’s move. Also read: Russian Govt Regulator Launches Blockchain Project with Sberbank
Earlier this week, the Japanese Finance Ministry announced its plans to end sales tax on Bitcoin by spring 2017. Media outlets praised the ministry’s efforts, noting that Japan now recognizes Bitcoin as a legitimate currency-like asset.
Sales Tax Termination and Impact on Bitcoin Ecosystem
The Japanese FSA and Finance Ministry believe terminating sales tax will maximize the bitcoin industry’s potential, creating a more viable ecosystem for consumers and users.
Many already consider Bitcoin an effective form of payment in comparison to traditional online payment methods, due to lower costs and transaction confirmation speeds. While conventional financial networks like PayPal and credit cards charge a range of 3% to 10% in transaction fees, Bitcoin charges $0.08 on average, according to 21.co’s Bitcoin Fees.
Thus, many expect ending sales tax to further increase cost-efficiency for both online and offline bitcoin sales. Payment-heavy markets like the e-commerce and Bitcoin exchange industries will greatly benefit from this proposal. However it still must pass a financial verification phase at the end of 2016.
Users currently pay around 8% consumption tax to purchase bitcoin at regulated exchanges like Bitflyer. A major exchange operator stated in an interview that sales tax termination would reduce administrative work substantially, and cut user costs.
Mainstream Media Reacts
Within a few hours since the Finance Ministry’s announcement, South Korean national news channels including KBS and MBC picked up the news. The outlets expressed optimism at Japan’s efforts to legitimize Bitcoin.
The news was broadcasted live to millions of active South Korean viewers. Additionally, local headlines said the Japanese government officially recognizes Bitcoin as a legal currency-like asset.
The Korean mainstream media further emphasized the Japanese bitcoin exchange market’s potential, which observers suggest will maintain its rapid growth throughout 2016.
South Korea’s largest news network Joongang Ilbo stated , “considering the number of Japanese investors trading bitcoin as a regular currency or asset, Japan has decided to eliminate sales tax on bitcoin.”
It also noted sales tax termination will allow Bitcoin’s use as a cash alternative, due to lower exchange fees.
Rapid Development of Japanese Bitcoin Industry
In March, the FSA and Japanese government also announced that virtual currencies including Bitcoin serve an identical set of functions to national currencies, like the Japanese yen.
With that announcement and the introduction of friendly regulatory frameworks for Bitcoin exchanges and businesses, the Japanese industry began to grow rapidly. Prominent international firms began to expand services to serve local users.
Kraken and Bitwala are some of the many international startups that successfully introduced their services into Japan. They recognized the region’s great potential, arising from general mainstream interest and practical regulations.
“We see a huge potential for Japan to open up to the innovative technology that lies within the blockchain and the wonders of using Bitcoin on a daily basis,” explained Bitwala marketing manager Andrea Hesler.
Local Bitcoin startups have also raised multi-million dollar funding rounds. BitFlyer secured US$27 million in investment in April, from established venture capital firms including SBI Asset Management and Venture Labo Investment.
Will this move spur Bitcoin growth in Japan further? Also, how should countries tax Bitcoin, if at all? Let us know.
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