Bitcoin has been hogging the limelight for a quite a while now, and rightly so. With prices hovering around $4300, the number one crypto currency shows no signs of slowing anytime soon. Bitcoin presently has a whopping $71 Billion market cap. This is nearly half the market cap of the entire crypto currencies.
Japan’s Bitcoin Connection
Japan had always been a pioneer in adapting to latest advancements. Therefore, it comes as no surprise that Japan is in the forefront in the case of Bitcoin as well.
Bitcoin was given a legal tender status by the Japanese government earlier this year. Bitcoin purchases were also exempt from Japan’s 8% sales tax rule, putting them on equal footing with stocks and bonds. Soon after, major Japanese retail store chains, like Marui, agreed to accept Bitcoin payments in their stores. This was done in a partnership agreement with Bitflyer, the popular Japanese Bitcoin exchange.
Nonetheless, Japan also remained quite vocal regarding the regulation of Bitcoin. According to the new rules, any Bitcoin or “alternative coin” exchange or money transfer business that wants to operate in Japan is mandated to come under the regulatory supervision of the Japan Financial Services Agency by October 1st.
What’s Next? Bitcoin Bonds
Japanese institutes have yet again taken the lead in the experimentation and structure of some new products. “Fisco” has now issued bitcoin-denominated, unsecured corporate bonds. Fisco is a popular financial information provider based in Tokyo. A bond is basically a debt issued over a certain period of time, that gives interest in addition to the principal amount.
According to the chief product officer of Fisco, Masayuki Tashiro, “The company issued a three-year bond worth 200 bitcoins to another firm in the Fisco group to test the bonds’ potential to become a useful fundraising tool.”
The issued Bitcoin bond pays a 3% return over the next three years and also returns the 200 bitcoins to the holder upon its maturity on August 10, 2022.
Tashiro explained that one of the goals of the sale was to test the bond’s potential to become a useful fundraising tool. “We expect that bitcoin will eventually be recognized as a financial product under local law governing financial instruments. If that happens and issuance of cryptocurrency debt takes off, “if we play a role of arranger, we could earn fees.”
Tashiro also clarified that the bond was designed like a regular corporate note to satisfy regulatory requirements.
Legal Still Murky for Bitcoin Bonds
The legal status of this Bitcoin bond still remains unclear. This is because, under Japanese laws, corporate bonds are defined as a bond issued in money, such as in yen or dollars. For now, this Bitcoin Bond is worth $862,800 at the current Bitcoin price of $4314.
Interestingly, Ethereum Bond is already in existence. Daimler AG, the manufacturing company behind Mercedes-Benz has already issued Schuldschein, a type of Ethereum bond, last month. The €100 Million bond was issued on a private version of the Ethereum blockchain and was designed to simplify the lending process.
Not the Best Risk-Reward Trade-Off
Bitcoin Bonds are said to be riskier due to the exponential growth rate of Bitcoin. This is because once Bitcoin prices surge higher, borrowing $1 million this month could very well turn into a debt of $2 million in few short months. But the companies whose earnings are mainly in Bitcoins can benefit immensely from such bonds. Any other regular companies would need to think twice before venturing into Bitcoin Bonds.
Ref Link: https://cointelegraph.com/news/major-japanese-retail-chain-marui-now-accepts-bitcoin-payments , https://calvinayre.com/2017/08/18/bitcoin/bitcoin-corporate-bond-debuts-japan/, http://www.investopedia.com/news/bitcoin-bond-moves-cryptocurrency-closer-legitimacy/ , https://news.bitcoin.com/japanese-exchange-debuts-bitcoin-corporate-bond/ , https://www.coindesk.com/daimlers-e100-million-ethereum-bond-bigger-mercedes-benz/ , https://www.cnbc.com/2017/08/17/bitcoin-bond-launch-brings-digital-currency-step-closer-to-high-finance.html, https://www.coindesk.com/corporate-analyst-fisco-tests-issuance-bitcoin-bond-japan/