Japan to set bitcoin rules, stop banks and brokerages from handling

TOKYO Wed Mar 5, 2014 8:35am IST

1 of 2. Mark Karpeles, chief executive of Mt. Gox, attends a news conference at the Tokyo District Court in Tokyo February 28, 2014.

Credit: Reuters/Yuya Shino

Related Topics

Kishore Pandey, 82, lies on a bed as his daughter, Usha Tiwari, holds him and a priest stands by them (L) at Mukti Bhavan (Salvation House) in Varanasi, in the northern Indian state of Uttar Pradesh, June 19, 2014. REUTERS/Danish Siddiqui

Waiting to die at Salvation House

The city of Varanasi is Hinduism's holiest city and many Hindus believe that dying there and having their remains scattered in the Ganges allows their soul to escape a cycle of death and rebirth.  Slideshow 

TOKYO (Reuters) - Japan will this week clarify the legal handling of bitcoin, people familiar with the matter said, the first sign that the government is taking action on regulating the virtual currency after the collapse last week of Tokyo-based Mt. Gox, once the world's largest bitcoin exchange.

The cabinet will decide on Friday how to treat bitcoin under existing laws, the people said, adding that banks and securities firms will not be able to handle bitcoin as part of their main businesses, suggesting it will be treated more as a commodity, like gold.

The government wants bitcoin transactions to be taxable, the Nikkei and Yomiuri newspapers said, but it remains unclear how the authorities could do this, given that one of the attractions of using bitcoins is that transactions are anonymous.

Bitcoin is a digital currency that, unlike conventional money, is bought and sold on a peer-to-peer network independent of central control. Its value has soared in the last year, and the total worth of bitcoins minted is now about $7 billion.

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.

Japan's Finance Ministry and Financial Services Agency 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.

"We still have not had a clear grasp of the situation," Finance Minister Taro Aso said on Tuesday about the Mt. Gox bankruptcy. "We don't know if it was a crime or just a bankruptcy.

The virtual currency has engendered a wave of creative criminality - from hacking online platforms to steal bitcoins to their potential in money laundering, bribery and buying illicit products.

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. Flexcoin had said last week it was not affected by Mt. Gox's closure and had "not lost anything."

Last week, U.S. Federal Reserve Chair Janet Yellen 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 has reported.

(Additional reporting by Mridhula Raghavan in Bangalore; Writing by William Mallard; Editing by Ian Geoghegan)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

India-Nepal Ties

REUTERS SHOWCASE

Tackling Food Prices

Tackling Food Prices

India to free up extra 10 million tonne wheat in open market  Full Article 

Facebook Results

Facebook Results

Facebook beats Wall Street targets, stock hits record high  Full Article 

GM Recall

GM Recall

GM recalls 717,950 vehicles in U.S., not for ignition switches  Full Article 

Hyundai Motor Results

Hyundai Motor Results

Hyundai Motor Q2 profit slips as firmer won, U.S. discounts hurt  Full Article 

Nokia Results

Nokia Results

Nokia raises networks outlook after Q2 profit beats estimates  Full Article 

Factory Sector

Factory Sector

China July HSBC flash PMI at 18-month high of 52.0   Full Article 

Breakingviews

Breakingviews

Apple winds up earnings hope for new gadgets  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage