The government is vowing to monitor illegal transactions of bitcoins, but will put off regulating trade of the online digital currency, according to government and ruling party officials.
Amid fears that criminal organizations have used bitcoins in money laundering and drug deals, the Ministry of Economy, Trade and Industry is set to map out a basic plan specifying how to monitor illicit transactions involving the digital currency, the sources said Tuesday.
In such monitoring, the ministry will work with other ministries and agencies, including the Financial Services Agency and the National Police Agency, they added.
Prime Minister Shinzo Abe’s administration will define bitcoins not as a traditional “currency” but a new type of “value-added electronic record,” such as credit card and electronic money transaction records, the sources said.
The government will warn consumers they are responsible for bitcoin trading, the officials said, indicating it would not enforce stricter rules that could hamper efforts to improve the quality of virtual currencies.
Tokyo is also unlikely to impose taxes on capital gains from bitcoin transactions, though it may levy a consumption tax on purchases of the digital currency, which could be classified as a new investment vehicle, they added.
In late February, the abrupt bankruptcy of Tokyo-based Mt. Gox — once the world’s leading bitcoin exchange — dented confidence in virtual currencies and accelerated discussions about how to regulate their use.
Mt. Gox, which is believed to have had up to a million traders, said it was illegally accessed in early February and consequently lost about ¥11.4 billion worth of bitcoins, converted at the rate for Feb. 25.
In March, the Cabinet adopted a formal position on bitcoin transactions, deeming the digital currency to be a noncurrency market product like precious metals.
The country has no laws regulating the virtual currency. With many lawmakers from both ruling and opposition parties arguing that bitcoins should be regulated, Abe’s Liberal Democratic Party has set up a special committee to discuss the issue.
The committee has apparently concluded that the country should make use of the virtual currency to bolster foreign investment and business in country in an attempt to invigorate the economy, rather than excessively strengthening its surveillance to protect consumers.