Bitcoin, the form of digital currency that is created and held electronically has been one of the most innovative and interesting developments in ecommerce in the 21st century. The first example of a growing category of money known as cryptocurrency, unlike traditional money which is in the form of coins and paper, Bitcoins are digital and are produced by people and businesses using specific pieces of technology that solve mathematical equations to ‘mine’ them.
Like traditional money however, its value is always changing and recent research suggests that some of the key drivers of the upward price of Bitcoins has been developmental events in particular countries, specifically China, India and most recently Japan.
The mainstream adoption of the currency in Japan has been the latest of these key drivers and began with the legalization bill drafted by the Japanese government’s Financial System Council that consider Bitcoin as a fully legal payment method. Because of this, Japanese businesses immediately began to integrate Bitcoin payments. Crucially, this included Japan’s leading electronics retailer Bic Camera who went into partnership with the bitFlyer Bitcoin exchange to allow its customers across Japan to pay for goods in Bitcoin. This in turn led to much media coverage and increased the demand for Bitcoin generally across Japan and beyond. Interestingly, 43% of the world’s Bitcoin exchange market is Japanese which means that their market share is larger than that of China, the US and Europe combined.
It’s not just Japan however where government actions are driving a demand for Bitcoins.
Michael Vogel, CEO of Bitcoins, says:
“China and India represent a significant portion of the world’s population and each has a rapidly growing middle and wealthy classes. Both of these countries are also experiencing turmoil with government imposed capital controls, so the importance of Bitcoin is much more apparent to its citizens as opposed to North America, for example. What is clear is that no matter what the government does, it is driving more and more demand for the two Bitcoin markets – regulated Bitcoins through exchanges and unregulated peer to peer Bitcoin. All these approaches show the rest of the world that government action drives Bitcoin demand in many unintended ways.”
Interestingly, more demand for Bitcoin could be created soon as a committee of central bank and government officials in India is set to propose new regulations related to digital currencies such as Bitcoin. The report, that will be delivered in the next three months will be recommending the implementation of policies relating to issues such as consumer protection and money laundering. The press release by the Indian government said:
“The committee will (i) take stock of the present status of virtual currencies both in India and globally; (ii) examine the existing global regulatory and legal structures governing virtual currencies; (iii) suggest measures for dealing with such virtual currencies including issues relating to consumer protection, money laundering , etc; and (iv) examine any other matter related to virtual currencies which may be relevant.”