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 The cabinet will decide on Friday how to treat bitcoins under
existing laws, said people familiar with the matter, adding that
banks and securities firms will not be able to handle bitcoin as
part of their main business, suggesting the crypto-currency will be
treated more as a commodity, like gold.
Japan has struggled to define its approach to bitcoin since the
collapse of Mt. Gox, which filed for bankruptcy protection in Tokyo
on Friday, saying it had lost bitcoins and cash worth some half a
billion dollars due to hacker attacks on what it said was its lax
computer system security.
Bitcoin, a digital currency that is traded on a peer-to-peer network
independent of central control, has engendered a wave of creative
criminality — from bitcoin theft by hacking online platforms to
potentially using the crypto-currency in money laundering, bribery
and buying illicit products. Its value has soared in the past year,
and the total worth of bitcoins minted is now about $7 billion.
Flexcoin, a Canada-based bitcoin bank, said on Tuesday it was
closing after it lost $600,000 worth of the online currency — all
the bitcoins it stored — to hacker theft.
TAXING PROBLEM
Japanese authorities are looking at possibly taxing bitcoin
transactions, but it remains unclear how they could do this, given
that one of the attractions of using bitcoin is that transactions
are largely anonymous.
"We haven't yet thoroughly grasped the situation, but some kind of
regulation is needed from the perspective of consumer protection,
and we will also discuss (bitcoin) from the perspective of imposing
asset tax," said Takuya Hirai, head of an IT panel in the ruling
Liberal Democratic Party.
The panel heard on Wednesday from consultant Deloitte about bitcoin
and from officials of the Consumer Affairs Agency, the Financial
Services Agency (FSA) the Finance Ministry, central bank, Cabinet
Office and the National Police Agency about the Mt. Gox collapse,
Hirai told reporters.
The FSA and the Finance Ministry have said bitcoin is not a currency
and doesn't fall under their purview, while the Bank of Japan has
said it was studying the bitcoin phenomenon with interest. Chief
Cabinet Secretary Yoshihide Suga said the relevant Japanese
ministries will be in close contact with each other on matters
relating to bitcoin.
A former insider at Mt. Gox told Reuters the exchange had repeatedly
approached the FSA in the past, asking it to define the handling of
bitcoin, but received no definitive answer. Last week, the FSA said
it had not recently been in contact with Mt. Gox, but did not
specify whether it had ever been in touch with the company. A lawyer
for Mt. Gox declined to comment.
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Taxing bitcoin is not without precedent.
U.S. online retailer Overstock.com collects sales tax on sales to
places where the company has a physical presence, such as its home
state of Utah, said vice chairman Jonathan Johnson. "It's pretty
easy to do with bitcoin as at this point we are converting bitcoin
into dollars immediately," he told Reuters.
But Hiroshi Mikitani, a prominent Japanese e-commerce billionaire
and CEO of Rakuten Inc, expressed caution about trying to regulate
the virtual currency. "They should not act hastily," he said,
according to Kyodo News. "As for whether we need regulations, they
should first examine the situation a bit more and discuss it in
depth."
INTERNATIONAL EFFORT?
Japan doesn't want to go it alone in trying to get a grip on
bitcoin. Any regulation of the crypto-currency should involve
international cooperation to avoid loopholes, Vice Finance Minister
Jiro Aichi said last week.
U.S. Federal Reserve Chair Janet Yellen has said Congress should
look into legal options for regulating virtual currencies such as
bitcoin.
Shanghai-based BTC China, the world's largest bitcoin exchange by
volume, has imposed regulations to curb bitcoin trade weeks after
Beijing banned financial institutions from trading in bitcoin due to
the risks involved.
Russian authorities have issued warnings against using bitcoin,
saying treating it as a parallel currency is illegal. Britain,
however, has supported bitcoin and is preparing to abort plans to
tax bitcoin trading, the Financial Times reported.
(Additional reporting by Sophie Knight in Tokyo, Mridhula Raghavan
in Bangalore and Peter Henderson in San Francisco; writing by
William Mallard; editing by Ian Geoghegan)
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