Breaking: Bitcoins legalised in Japan – legal framework and tax treatment

The Japanese have brought into force a new legislation treating digital currency as a legal payment method, from the beginning (1 April 2017) of this fiscal year. Bitcoins are now legal tender in Japan and are at par with other fiat currencies. This has been made possible by the passing of a new law called the Virtual Currency Act by the Diet. The Financial Services Agency announced that it is going to treat cryptocurrencies as legal tender from April 1st, 2017.

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Value of bitcoins; RBI on bitcoin; legality of bitcoin transactions in India

Bitcoins are numbers you can trade with. People would be ready to exchange goods and services with bitcoins as they value the bitcoin numbers. Compared to currency which is made out of thin air by a central bank, bitcoins and other digital tokens, require massive computational power to generate, and have a base in global energy prices.

This idea of using a set of protocol to transact and create new bitcoins securely was published by an Anonymous author using the pseudonym of Satoshi Nakamoto. The paper was titled: Bitcoin: A Peer-to-Peer Electronic Cash System by Satoshi Nakamoto

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The Mt. Gox incident – the largest bitcoin hack ever

An American software developer named Jed McCaleb founded a platform in 2006 named Magic: The Gathering Online eXchange. He set up the platform for secure exchange of trading cards used in a video game by the same name, using the domain name mtgox.com. This platform allowed cards to be bought and sold like stocks.

Some quarters say that it was this underlying technology of trading imaginary cards securely that formed the basis of bitcoins. Although McCaleb never released the original code written by him for Mt. Gox, it is true that the bitcoin technology is similar to such card exchange technology. It is also in popular notion that the anonymous author of the Bitcoin paper,1 Nakamoto, is probably McCaleb himself.

It is important at this juncture to understand how the bitcoin and blockchain works. I would recommend you to go through my earlier post on What are bitcoins / cryptocurrency / blockchain – what is so different than fiat money?

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