Japan does not want people buying drugs with Bitcoin – but it doesn’t want to regulate the currency either (not yet, anyway).
Japanese government officials are looking into ways to monitor illegal transactions paid for in digital currency, but are putting off regulating Bitcoin and its brothers under current law, according to a report by Kyodo News International published Tuesday.
Fears about Bitcoin use in criminal activity have come to the forefront of government attention since Japan made its first arrest for alleged drug trafficking using Bitcoin earlier this month. The suspect allegedly paid US$34,500 in Bitcoin to pay for 50 grams of a stimulant drug from Mexican suppliers.
Japan’s Ministry of Economy, Trade and Industry has been tasked with outlining a strategy for keeping track of illegal Bitcoin activity in concurrence with state police and financial oversight agencies, the report said, citing anonymous sources.
Government officials have also clarified their definition of Bitcoin, the report said, declaring it a new type of “value-added electronic record” similar to credit card transactions and electronic fund transfers.
Prime Minister Shinzo Abe’s administration had previously defined Bitcoin only as a non-currency market product, much like precious metals.
The Japanese government is taking a hands-off approach to regulation, the report said, so far only warning consumers that they are responsible for their own trading in Bitcoin.
Japan could start collecting consumption taxes on purchases of Bitcoin if it is labeled a new type of investment model, though the report said it was “unlikely” the currency would be subject to capital gains tax on Bitcoin transactions.
Authorities across the international community began to research implications and regulation of Bitcoin in earnest over the last year as use of the currency continued to spread, though the sudden collapse of Tokyo-based trader Mt. Gox in February that resulted in the loss of an estimated US$500 million in Bitcoin has made Japanese traders and enthusiasts particularly wary.
Governments around the world have issued statements explaining their positions on the use of Bitcoin and other virtual currencies, ranging from permissive to hostile. Research site bitlegal.net has compiled official responses to Bitcoin use organized by country, including the date each summary was posted to avoid confusion about new legislation.