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Japan leads the way by regulating forex trading in Bitcoin

1st August 2017 Print
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It looks like Japan may have just gotten a lead in the global race of exchange markets by passing legislation earlier this year that would allow for Bitcoin to be traded in its forex market, alongside dollars and yen. Could this be just the start for the digital currency that seems set on changing the rules of the game?

Bitcoin and Forex Trading: A Power Couple?

Forex trading is short for foreign exchange trading – also seen as FX – which translates to the buying and selling of foreign currencies on the forex market in order to make a profit. Forex is actually the largest financial market in the world, with transactions worth trillions of dollars being made daily. In contrast to stock broking or trading in commodities, in forex trading there is no central exchange; instead, a global network of dealers, brokers and banks is trading currencies, which effectively means you can trade 24 hours per day on weekdays – there are even trading apps out there for making deals on the go.

The forex market is also one of the most volatile, since a lot of players are involved and prices can fluctuate rapidly. Interest rates, national policies, import/export demands and inflation can all have an impact – which might help partially explain the appeal of adding Bitcoin to the forex market. Bitcoin is a decentralised currency, so there is no central bank regulating its issuance and valuation, and it is also thus largely immune to topical influence like government policy decisions and national inflation. Dealing in Bitcoin might be preferred, especially by seasoned investors, for the high leverage and flexible spreads, as well as the low deposit and low or zero transaction costs that are typically offered by many forex brokers.

Japan’s Decision Reaffirms Bitcoin’s Success as Leading Cryptocurrency

Yet this is only part of the explanation. The truth is that, since it was invented in 2008 by an individual or group of individuals who went by the name of “Satoshi Nakamoto” and had its core code be made publicly available to developers in 2010, Bitcoin has moved from a utopian idea to a very much palpable reality that has actually gained a stronghold on markets worldwide. Powered by cryptography instead of a central bank and “mined” by distributed computer networks around the globe – its total supply can never exceed twenty-one million – the cryptocurrency has really taken off in the last couple of years. It saw a 364% surge in its price in just one year, as it rose from $443 in May 2016 to over $2,000 in May 2017 – actually surpassing the price of a troy ounce of gold on the way.

Infographic: Bitcoin: The Digital Gold Hits $2,000 | Statista You will find more statistics at Statista

It is really telling that Japan, renowned for its culture of cautious financial moves and for its Mrs Watanabe investors (smaller retail investors that routinely seek very safe investment options), has decided to take a leap of faith in inviting Bitcoin on the official forex market. Exchanges, funds and similar businesses now need to register with the Japan Financial Services Agency by October 1st, 2017 and submit to its regulatory supervision and periodical audits.

The move signals that indeed cryptocurrencies are here to stay, with Bitcoin paving the way – and we might soon see more enter the forex market after establishing themselves long enough in the market.

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