The Japanese cabinet is to consider how best to apply the country’s existing laws to bitcoin – with a view to taxing the currency.
The authorities will look at taxing transactions, but have yet to crack the problem of bitcoin’s much-vaunted anonymity. With no central registry of ownership, it takes a great deal of effort to link a digital holding of bitcoin with an individual in the real world.
“We haven’t yet thoroughly grasped the situation, but some kind of regulation is needed from the perspective of consumer protection, and we will also discuss [bitcoin] from the perspective of imposing asset tax,” said Takuya Hirai, head of an IT panel in the ruling Liberal Democratic party ahead of Friday’s cabinet meeting.
In the wake of the collapse of Tokyo-based bitcoin exchange MtGox, the country’s government has been forced to reassess its earlier view, stated by its Financial Services Agency, that “bitcoin isn’t a currency … therefore bitcoin exchanges are not a subject to our regulatory oversight”.
A former insider at MtGox told Reuters the exchange had repeatedly approached the FSA in the past, asking it to define the handling of bitcoin, but received no definitive answer. Last week, the FSA said it had not recently been in contact with MtGox, but did not specify whether it had ever been in touch with the company. A lawyer for MtGox declined to comment.
Japan does not want to go it alone in trying to get a regulatory grip on bitcoin. Any regulation of the cryptocurrency should involve international cooperation to avoid loopholes, vice finance minister Jiro Aichi said last week.
Japan’s investigation follows the clarification by the UK’s HMRC that bitcoin should be treated as a currency for tax purposes. In Britain, traders buying and selling bitcoin no longer have to pay VAT on their purchases of the currency, but are instead liable for capital gains tax or income tax if they make a profit on their speculation.
It is unknown how many bitcoin traders did, in fact, pay VAT on their purchases of bitcoin before HMRC changed its official advice.
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