What is the convenience of virtual currency (crypto assets)? Also explains the difference between legal currency and electronic money

Virtual currency is a general term for currencies that are managed and operated on the Internet using cryptographic technology. There are also virtual currencies that do not have a specific issuer or administrator, and are also called “cryptocurrencies” or “digital currencies.”

It can be used primarily for remittances and payments over the Internet and is also used as an investment. In addition to Bitcoin (BTC), the representative virtual currency, there are now over 1,500 types of virtual currencies in existence in the world.

What is virtual currency? Legal definition of virtual currency

First, under Japanese law, “virtual currency” is defined as follows. However, there are some difficult parts in the definition below, so I will briefly introduce them later.

Definition according to Article 2, Paragraph 5 of the Fund Settlement Act:

In this law, “virtual currency” refers to the following:

(1) When purchasing or renting goods or receiving services, the person may use the goods for payment to an unspecified person, and may purchase or rent goods with an unspecified person as the other party. Property value that can be sold (limited to those recorded electronically in electronic devices and other things, excluding Japanese currency, foreign currency, and currency-denominated assets; the same shall apply in the next item), which is electronic. Items that can be transferred using information processing organizations

(ii) Property value that can be mutually exchanged with the items listed in the preceding item with an unspecified person as the other party, and that can be transferred using an electronic data processing system.

Difference between virtual currency and fiat currency

So, what is the difference between virtual currencies and legal currencies such as the Japanese yen and US dollar, even though they are called the same currency?

Fiat currencies are issued and controlled by specific countries or central banks. In Japan, coins produced by the Japanese Mint and issued by the Japanese government, and Bank of Japan notes (banknotes) issued by the Bank of Japan, Japan’s central bank, are legal tender.

In other words, the value of the currency is guaranteed by the state or similar institutions.

On the other hand, some virtual currencies do not have an issuer or administrator like legal currencies. There is no guarantee of value by the state, etc., and the value is based on the trust of the user.

In addition, it does not exist physically like legal tender coins and banknotes but exists as electronic data on the Internet. Therefore, you can send money and make payments anywhere in the world as long as you have an internet connection.

It is also possible to easily exchange it for another virtual currency or fiat currency through a virtual currency exchange or sales office.

Difference between virtual currency and electronic money

Electronic money is often confused with virtual currency. In recent years, many people have been using them at stations and convenience stores almost every day.

There are six major differences between virtual currency and electronic money:

① Different publishers

② The corresponding laws are different.

③Is there centralization or not?

④ Available locations are different.

⑤Is the price volatility large?

⑥ Whether points can be earned or not

When making a payment using the virtual currency Bitcoin (BTC), the payment is made using Bitcoin (BTC) itself. On the other hand, electronic money is not like that.

Electronic money can be charged in advance or debited from an account at a later date, and in fact uses Japanese yen. Although they are the same in that payments are made without the use of physical bills or coins, Japanese yen is used for electronic money payments.

Also, like legal currency, there are operating companies that issue and manage electronic money.

What is the convenience of virtual currency? What’s good about it?

So, what kind of convenience does virtual currency have?

As mentioned above, virtual currencies can be used for remittances and payments over the Internet. However, virtual currencies have other uses as well.

Here we would like to take a look at its uses and convenience.

Overseas remittance is cheap and fast

Virtual currencies can be transferred directly between individuals without going through financial institutions such as central banks.

Normally, when making international remittances using fiat currency, there are high remittance fees. On the other hand, if you use virtual currency, you can send money much cheaper and the transfer time is also much shorter.

Virtual currency as a payment method

Virtual currency can also be used as a means of payment when purchasing goods and services. In Japan, the number of stores that accept it, such as major electronics stores, is gradually increasing.

Although you need to download a payment application in advance, the operation itself is very simple. In the future, as the number of stores introducing this service increases, it is possible that even more user-friendly apps will appear.

Virtual currency as an investment/speculation target

Similar to securities trading and FX trading, virtual currencies can also be operated as investment and speculation products.

As of 2019, there may be greater demand for this purpose than for remittances and payments. Even if virtual currency is currently worth less than a few yen or tens of yen, the price of virtual currency may soar tens or even hundreds of times in a few years.

Many people have actually made big profits by buying when the price is low and selling when the price has risen in the future. Another appeal is that, unlike stock investment, you can easily start investing with a small amount, such as a few hundred yen.

Where can virtual currency actually be used?

There are still very few places where you can actually use virtual currency, but the number of places where you can actually use virtual currency is steadily increasing, especially Bitcoin (BTC). I would like to introduce some specific places where you can use it.

bitcoin mall

This is an online shopping site that handles a wide range of products such as electrical appliances, car supplies, and household goods. You can pay with Bitcoin (BTC) and Monacoin (MONA), and cannot pay with Japanese yen or credit cards.

Although it may be inconvenient to be able to pay only with virtual currency, it has the advantage of reducing the risk of personal information leakage.

Credit card payments have risks such as the card number being leaked, but Bitcoin (BTC) payments do not have that risk. You can make payments more securely without having to enter your credit card information.

Bic camera

At Bic Camera, a major electronics retailer, you can pay with Bitcoin (BTC) at all stores and online shops.

You can pay with Bitcoin (BTC) up to the equivalent of 300,000 yen per transaction at stores and up to 100,000 yen at online shops. As with cash payments, you can also receive a 10% point return service.

In this way, there are already places where you can pay with Bitcoin, both online and in physical stores. Also, the above are just a few examples; there are other stores all over Japan that have introduced virtual currency payments.

What will the future hold for virtual currencies?

What will happen to virtual currencies in the future? In 2017, there was an explosive speculative boom in virtual currencies, but that has now calmed down.

However, it is just that the speculative boom has passed, and the virtual currency itself has not become obsolete. In Japan, major companies continue to enter the virtual currency business, and megabanks have announced the issuance of their own virtual currency.

Supported by this trend, it is possible that virtual currencies will become more prevalent in general society in the future.

With the spread of credit cards and electronic money, Japan is gradually becoming more cashless. With this wave of cashless payments, the number of shops that introduce virtual currency payments may increase.