The government is weighing the legal regulation of virtual currencies such as bitcoins as suspicions widen over the alleged criminal activities of the arrested founder of what used to be the world's largest exchange of bitcoins and as international calls grow for tightening control of cybermoney due to the risk of their abuse for money laundering and terrorist financing. The planned regulations should aim to protect users of virtual currencies, which are increasingly popular both in Japan and overseas due to their convenience as tools for fund transfers and financial settlement. Rules and systems to ensure safety and transparency of cyber currency transactions should in turn enhance their reliability and serve to promote their potential.

Following this month's arrest of Mark Karpeles, founder and chief executive officer of the bankrupt Tokyo-based firm Mt. Gox, Finance Minister Taro Aso said the government would consider new regulations on virtual currencies such as the introduction of a registration or license system for operators of cybermoney exchanges. The Finance Ministry, the Financial Services Agency and the National Police Agency are expected to work with other relevant authorities to amend the anti-money laundering law and possibly the law on transaction in financial products, with a view to submitting related bills to the regular Diet session next year.

Virtual currencies such as the bitcoin are traded with real currencies like the yen and the U.S. dollar at exchanges in cyberspace. They are generated by complex chains of interactions among computer networks, but are not backed by any government or central bank. The cyber currencies have become popular due to their much lower transactions fees in money transfers and financial settlements compared to bank transactions and credit card settlements, as well as the convenience of year-round 24-hour service. The number of domestic bitcoin users has reportedly continued to increase even after the bankruptcy last year of Mt. Gox, which once boasted of handling about 80 percent of bitcoin transactions worldwide, and is now estimated at 20,000 to 30,000 people.