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Japan expected to impose taxes and regulations on bitcoin this week

The country is expected to issue new guidelines on bitcoin this week which will prevent banks from opening accounts or serving as bitcoin exchanges

JAPAN MAY SLAP regulations on bitcoin including taxing transactions, a report said Wednesday, as the global digital currency suffered another alleged theft that cast doubt on its reliability.

Tokyo will issue new guidelines, possibly this week, which would pave the way for firm rules that could see banks and brokerage houses restricted in how they deal in the virtual unit, leading Nikkei business daily reported without citing sources.

Regulators around the world are grappling with how to handle the currency, and Japan would become one of the first major economies to set firm rules for the unit.

US Federal Reserve head Janet Yellen has said the Fed had no powers over a currency that only exists virtually with no central authority behind it. Several countries, including Russia and China, have heavily restricted how bitcoins can be used.

The Nikkei report, which follows a similar story by the leading Yomiuri Shimbun on Tuesday, came a day after an alleged theft by hackers forced a Canada-based online business serving bitcoin traders and investors to shut down.

That followed the spectacular failure of the Tokyo-based MtGox trading exchange last week, setting off alarm bells over bitcoin, which backers have promoted as a low-cost alternative to traditional currencies such as the dollar or Japanese yen.

Bitcoin is generated by complex chains of interactions among a huge network of computers around the planet.

MtGox, which at one time reportedly processed 80 per cent of global bitcoin transactions, last week sought bankruptcy protection and admitted that it lost half a billion dollars worth of the digital currency.

Regulations

The Nikkei said Tokyo would define bitcoin as a commodity, like gold, which would mean gains from trading the unit would be subject to taxation, while any bitcoin-linked revenue among firms would also face a levy.

Under the proposals banks would be barred from opening accounts or serving as bitcoin exchanges, while securities firms would not be allowed to broker trades in the unit, it added.

But it was unclear how authorities would enforce any future rules given the challenge in tracking an opaque currency which critics fear could be used to finance organised crime and terrorism.

A lawyer for MtGox has said about 750,000 bitcoins belonging to customers had gone missing from its digital vaults, along with about 100,000 units of its own store of the unit – worth about $560 million in all based on current prices.

Supporters insist bitcoin is sound and the problems lay with MtGox, which they said was badly managed and unable to cope with the burgeoning popularity of the young currency.

Referring to MtGox, Japanese Finance Minister Taro Aso said Tuesday that “it’s difficult to know whether there was a crime or a simple corporate failure”.

On Tuesday Canada-based Flexcoin, which billed itself as a bank for bitcoin, said someone attacked its systems and stole nearly $600,000 worth of the virtual unit, forcing it to shut down.

- © AFP, 2014

Read: Bitcoin bank forced to shut down after all of its coins were stolen >

Read: So what’s the next step for bitcoin? >

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