Understanding Cryptocurrencies
Cryptocurrencies (or virtual currencies) are digital assets designed to work as a medium of exchange on the internet. Defined under Japan’s Payment Services Act, they possess the following key characteristics:
Exchangeability:
- Can be used for payments among unrestricted parties.
- Convertible with fiat currencies (e.g., JPY, USD).
Digital Transferability:
- Recorded and transferred electronically.
Non-Fiat Status:
- Not issued by governments/central banks (e.g., Bank of Japan).
- Not backed by physical assets like prepaid cards.
Popular examples include Bitcoin (BTC) and Ethereum (ETH).
Why Cryptocurrencies Gained Attention
- Decentralized Transactions: Enables peer-to-peer value transfers without intermediaries like banks.
- Access via Exchanges: Acquired through registered cryptocurrency exchange providers (regulated by Japan’s Financial Services Agency).
👉 Discover secure trading platforms
Risks and Considerations
- Price Volatility: Values fluctuate sharply due to market demand/supply.
- No Intrinsic Backing: Unlike fiat currencies, cryptocurrencies lack central-bank guarantees.
- Fraud Risks: Scams are prevalent—always verify sources.
Regulatory Reference:
- Consumer Advisory on Cryptocurrency Risks (Japan Financial Services Agency).
FAQs
Q1: Are cryptocurrencies legal in Japan?
A: Yes, but only through registered exchanges complying with Financial Services Agency (FSA) regulations.
Q2: How do I store cryptocurrencies safely?
A: Use hardware wallets or trusted exchange platforms with robust security measures.
Q3: Can cryptocurrencies replace fiat money?
A: Unlikely—they serve as complementary assets due to volatility and regulatory limitations.
Q4: What drives cryptocurrency prices?
A: Factors include adoption rates, investor sentiment, technological developments, and macroeconomic trends.