After the tragedy of Mt. Gox, once the highest volume Bitcoin exchange, Japanese authorities are most likely already working on a plan of action to regulate the virtual currency. New guidelines will be issued by the cabinet, possibly later this week. A decision will be made for how the currency should be treated under the already existing laws.
Additionally banks and security firms will not be able to handle Bitcoin as part of their main businesses since cryptocurrencies will be treated similarly to a commodity, like gold.
Problems with taxing
Japanese authorities are trying to figure out ways to tax Bitcoin transactions, however, the way this could be done hasn’t been figured out yet since one of the core advantages of using Bitcoin is the small fees and the part-anonymity.
“We haven’t yet thoroughly grasped the situation, but some regulation is needed from the perspective of consumer protection, and we will also discuss (bitcoin) from the perspective of imposing asset tax,” was what Takuya Hirai, a Japanese politician of the Liberal Democratic Party stated.
Services using the virtual currency have experienced a wave of cyber attacks lately. From hacking online platforms to theft of coins. Numerous people were affected by recent attacks.
The virtual currency has engendered a wave of a creative criminality – from hacking online platforms to steal Bitcoins to their potential in money laundering, bribery and buying illicit products. Even earlier this week Flexcoin, a Canada-based Bitcoin bank-like service announced that they were shutting down their services after a massive theft. Their total losses neared $600,000 worth of coins.
The panel had a hearing on Wednesday with consultants and officials from the Japanese authorities about the Mt. Gox collapse as Hirai said to reporters. The FSA and the Finance Ministry have stated that Bitcoin is not a currency and doesn’t fall under their jurisdiction according to them, 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.
In the other hand, there are People like Hiroshi Mikitani (Japanese e-commerce billionaire and CEO of Rakuten Inc), who believe that Japanese authorities should be extra cautious with their actions when trying to regulate virtual currencies. “As for whether we need regulations, they should first examine the situation a bit more and discuss it in depth.” As he said to Kyodo News.
Does regulation have to be an International effort?
Japan sure doesn’t want to go alone when trying to tax cryptocurrencies. Any regulation should involve international cooperation to prevent tax loopholes, Vice Finance Minister Jiro Aichi said last week.
This would surely be something hard to achieve. There is almost no way Governments and financial authorities worldwide would agree on applying the same regulation rules. Even the US Senate had a hearing regarding Bitcoin in the past, their stance against Bitcoin was overall friendly; treating Bitcoin as innovation and agreeing on the fact that any regulation might drive this technology away from their country by making the market unattractive for it’s related services. An opinion opposed to the one the Japanese authorities have.
Japan is surely going to have a hard time finding “international cooperation” on regulations. And to be honest regulations might not be harmful for Bitcoin but nobody knows what’s going to follow if people with minimal on virtual currencies experience like those in the Japanese financial authorities try to regulate Bitcoin after a week long debates.