Payments are the talk of the town at Sezzle HQ. We’re constantly sharing articles as we work, chatting about industry updates, and sharing our perspectives. Today, we write about a hot topic in recent weeks: Bitcoin (BTC).
We recently read about Japan’s recognition of Bitcoin as an official payment method. Japan continues to develop as a leader and early adopter in the cryptocurrency space. This blog post will specifically discuss the Japanese cryptocurrency revolution and imminent challenges related to Bitcoin as an official payment method.
Electronic money is popular in Japan, one of the most prevalent being rechargeable smart cards that can be used with a number of merchants. Consumers want more payment options, and with Bitcoin’s recognition as an official payment method, there has been a strong response from Japanese corporations.
Two major Japanese firms have reached agreements with Bitcoin exchanges since the bill became effective on April 1st. These agreements have set the stage for large retailers to begin accepting Bitcoin as early as this summer.
One of these retailers is a firm with a proprietary point-of-sale (POS) app that is widely used in Japan. Over 250,000 retail locations use the service and will soon be capable of accepting Bitcoin.
Even with Bitcoin officially recognized and implemented in Japan, many still believe that significant challenges remain that could stagnate its growth.
Challenges from Early Adoption
Accounting and reporting uncertainties:
Japan’s new law defines Bitcoin as a form of payment, not as a legally-recognized currency. Bitcoin is to be treated as an asset that is usable for payments, creating questions for currency exchanges and accounting departments.
For example, there is a great deal of uncertainty around how to account for Bitcoin on the books. Lack of accounting standards has many implications, including the possibility of distorted valuations or sudden realization of large losses for firms that hold Bitcoin and other virtual currency. These firms often leave virtual currency off the books, a serious accounting dilemma.
Improving processing capability:
Another key challenge is considering the decentralization of Bitcoin and the volatility with which the virtual currency operates. Strife among Bitcoin’s Federal Open Market Committee about a currency split has been a recent threat. This stems from disagreements on the most effective way for Bitcoin to increase network capacity and process a higher volume of transactions, a key downfall of the current system. Read about that here.
BTC in Japan as a case study:
Though many challenges remain, Bitcoin value has spiked significantly since news of Japan’s legislation. It will be interesting to keep an eye on Bitcoin’s use in Japan during this transition period. Many believe it will serve as a valuable testing ground to observe and learn how Bitcoin as a payment method will continue to evolve.
When considered solely as payment methods, Sezzle and Bitcoin do have something in common. Both offer a blossoming opportunity for merchants to cut their payment processing costs and challenge the hegemony of the credit card networks.
How successful do you think Japan’s large-scale rollout of Bitcoin will be? What other challenges do you see arising? Let us know in the comments section below!