Bitcoin is not a currency

Cabinet: Bitcoin is not a currency

by Reiji Yoshida

Under Japanese law, bitcoins are not recognized as currency and transactions using it should be taxed based on the income, corporate and consumption tax laws, the Cabinet announced Friday in a written statement.

The statement was issued in response to a written question from Upper House member Tsutomu Okubo of the Democratic Party of Japan.

During his daily news conference, Chief Cabinet Secretary Yoshihide Suga said the Finance Ministry should consider how it can tax bitcoin-based transactions.

“In general, it is only natural for the Finance Ministry to consider how it can tax transactions if they generate a profit,” Suga said.

The Cabinet’s written statement also said the Bank Law does not allow banks in Japan to open bitcoin deposit accounts, broker buying and selling of bitcoins or exchange bitcoins for foreign currencies on behalf of their customers.

Investors have been keenly interested in how the government will regulate bitcoins after Tokyo-based Mt. Gox, the world’s largest bitcoin exchange, filed for bankruptcy Feb. 28 in a major international scandal, claiming its system was hacked and had lost all of its deposits of 750,000 bitcoins (valued at around $500 million) as well as ¥2.8 billion in cash in customer accounts, along with 100,000 bitcoins of its own.

Asked how the government would regulate bitcoins in response to Mt. Gox’s bankruptcy, Suga only said the Abe administration is still analyzing the situation.

“Right now we are studying what we can do under existing laws,” he said, adding that officials will “keep watching” the ongoing bankruptcy proceedings of Mt. Gox.

Financial regulators across the world are now trying to determine if and how they can regulate virtual, Net-based currencies like bitcoins.

Bitcoin transactions have reportedly been used in illicit dealings, such as money-laundering operations.

The administration was also asked if bitcoins can be used to launder ill-gotten money and how this can be regulated, but the Cabinet statement did not address this issue.

“It is difficult to answer (that question) at this stage, because how bitcoins are actually being used and other situations are not clear,” the administration said.

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