Japan firm debuts bonds denominated in bitcoins

Companies and investors worldwide are looking for ways to make money out of bitcoin, a virtual currency.
Companies and investors worldwide are looking for ways to make money out of bitcoin, a virtual currency.PHOTO: REUTERS

TOKYO (BLOOMBERG) - Japan's Fisco Ltd is experimenting with selling bonds denominated in bitcoins, figuring that the digital currency will eventually become a legally recognised financial asset in Japan and help boost its business.

A unit of the Tokyo-based financial information provider issued three-year debt worth 200 bitcoins to another firm in the Fisco group on Aug 10, in what likely is the first such deal in Japan, according to Mr Masayuki Tashiro, the company's chief product officer. One goal of the sale was to test the bonds' potential to become a useful fundraising tool, he said. The notes issued were worth about US$813,000 (S$1.1 million) as of Wednesday (Aug 16).

The experiment is another example of how companies and investors worldwide are looking for ways to make money out of bitcoin. Some investors have turned to digital currencies as a haven asset as tensions between the United States and North Korea escalate. Japan, where regulators have made more progress than other nations in crafting cryptocurrency laws, is becoming a hub for blockchain experimentation.

"We expect that bitcoin will eventually be recognised as a financial product" under local law governing financial instruments, Mr Tashiro said. If that happens and issuance of cryptocurrency debt takes off, "if we play a role of arranger, we could earn fees", he said.

Prime Minister Shinzo Abe's government on April 1 legalised cryptocurrencies as a form of payment and placed rules around audits and security. In July, regulators began allowing bitcoin purchases to be exempt from the nation's 8 per cent sales tax, putting them on similar footing with financial products such as stocks and bonds.

The legal clarity has given Japanese companies the green light to experiment with blockchain products. Electronics retailer Bic Camera now accepts bitcoin as payment at certain stores, while Peach Aviation plans to begin accepting it to book flights later this year. In finance, SBI Holdings last month began using a blockchain for currency remittance, while Sumitomo Mitsui Financial Group joined a consortium of companies that plan to use the technology for settlements.

Bitcoin surged past US$4,000 this week on increasing optimism that faster transaction times will hasten the spread of the digital currency. The currency was at US$4,362 on Thursday in Asia, according to Bloomberg-compiled data.

Fisco designed the bond like a regular corporate note so that it could satisfy regulatory requirements, Mr Tashiro said. The debt pays a 3 per cent coupon and gives the holder 200 bitcoins back when it matures, according to a press statement. Fisco may experiment further with such debt, added Mr Tashiro .