Prices of real-world currencies and virtual currencies fluctuate

The currency you normally use in the real world is issued and circulated in amounts determined by each country's central bank.

And the strength of a currency against foreign currencies is determined daily in the form of exchange rates, reflecting various factors such as circulation volume and economic conditions.

When the United States ends its monetary easing policies, the dollar can strengthen,

and when Japan continues its unprecedented monetary easing, the yen can weaken,

and these are managed by central banks, governments, and nations.

On the other hand, cryptocurrency systems exist in places beyond the reach of national laws, so they can pose a threat to central banks, governments, and nations, and in some countries/regions their use is regulated.

Additionally, legal frameworks that must be observed when handling real-world money exist,

for example, because they are outside the scope of laws such as the Financial Instruments and Exchange Act and the Money Lending Business Act, financial institutions that bear enormous costs to comply with the law cannot ignore their existence.

◯ The existence of cryptocurrency exchanges and trading platforms

Bitcoin is famous in the news for

the news of a Norwegian man in 2013 who bought 5,000 Bitcoins for $24 (about 2,400 yen) and used the rising value of those Bitcoins to buy a house, becoming a Bitcoin billionaire.

And Mount Gox (MTGOX) collapsed after suffering a theft of Bitcoins worth 30 billion yen, from late 2013 to February 2014.

These events caused Bitcoin's image to become mysterious and associated with an image of “virtual.”

And people began to be interested only in whether buying coins would make their value rise.

What kind of entity was the failed Mt. Gox?

In other words, it was an exchange to trade real-world currency for Bitcoin.

The reason exchanges were created in the first place was that

those who successfully mined Bitcoins wanted to recover the costs they had incurred, not just hold Bitcoins.

Furthermore, they began to want to sell Bitcoin at a profit above cost.

At the same time, investors who learned of Bitcoin but did not want to mine it still wanted to obtain Bitcoin.

As demand for exchanging currencies for Bitcoin arose, exchanges emerged as places to trade.

That was around 2010.

Since Mount Gox collapsed, many exchanges exist, and currencies such as the dollar, euro, and yen can be exchanged for Bitcoin and other cryptocurrencies.

Mt. Gox was only an exchange and did not lie outside the Bitcoin system or have any direct relation to the Bitcoin system itself.

In Japan, in response to the Mt. Gox incident, a bill related to virtual currencies was submitted to the Diet on March 4, 2016, with the aim of protecting users.

Exchanges would be subject to capital regulations and external audits.

Since the legal framework is still being established,

users need to be aware in advance that they must take responsibility themselves when choosing a cryptocurrency exchange.

◯ The rise and fall of Bitcoin prices

Bitcoin prices rose significantly in 2011 and 2013.

Possible triggers include

・ Bitcoin payments becoming possible on dark web sites

・ Bitcoin becoming usable on online casinos

・ Cypriot shock causing concerns about real money

On the Silk Road on the dark web, a place where drugs and other goods not available on ordinary sites could be purchased, Bitcoin payments offered users an irresistible opportunity.

Normal payments can be traced to who the buyer is through methods such as credit cards or bank accounts.

Therefore, users tend to feel reluctant to purchase illegal items.

Yet, on Silk Road, with the use of software, Bitcoin could be used while maintaining anonymity.

During the Cyprus crisis in 2013, Cyprus asked IMF for financial aid, and one of the aid conditions was a 9.9% tax on all deposits.

As cash could be taxed unilaterally, funds flowed into currencies without state control, such as Bitcoin.

On October 14, 2013, Baidu in China announced Bitcoin payments.

Chinese investors' funds flowed in, and Bitcoin prices jumped tenfold.

However, after reaching a high on December 5, they plummeted.

The reason was the People’s Bank of China announcing that

“Bitcoin cannot be circulated or used as currency in the market.”

and Baidu announced the suspension of Bitcoin payments.

Thereafter, in 2014

there were opinions that “cryptocurrency and fiat currency can coexist.”

In 2016, the People’s Bank of China clarified plans to develop and issue a new cryptocurrency for the Chinese economy as part of a trend toward easing cryptocurrency regulations after Bitcoin prohibition.

Thus, there is a history of price fluctuations accompanying regulatory changes.

(The purchaser-facing portion should be rewritten here)