Japan Plans to Regulate Bitcoin: Report

One of Bitcoin enthusiast Mike Caldwell's coins in this photo illustration at his office in Sandy, Utah
A physical bitcoin created by Mike Caldwell is seen in a photo illustration in Sandy, Utah, in this file photo taken September 17, 2013. JIM URQUHART / Reuters

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Japan is taking steps to regulate bitcoin, and will introduce legislation to that effect soon, according to a report in the Nikkei Asian Review. But it won't be a currency, like yen or dollars — instead, bitcoins will be treated as a tradeable commodity like gold or oil. How Japan plans to enforce these regulations, no one knows for sure.

After the largest bitcoin exchange, Tokyo-based Mt. Gox, collapsed with potentially hundreds of millions of dollars unaccounted for, a Japanese lawmaker asked the government to make its position on the virtual currency clear.

The cabinet is set to announce regulations soon; the Nikkei Asian review reports these will likely take the form of making revenue earned from bitcoin transactions and sales fall under the country's 8 percent "consumption tax," similar to the sales tax in the U.S.

But given the largely anonymous nature of bitcoin commerce, how is the country to know whether a transaction is taxable — or even in Japan? To start with, businesses based in Japan that take bitcoin as payment would have to report that income, and Japanese individuals making significant amounts from trading or mining in the virtual currency would be required to declare it as well.

Banks and securities firms could be barred from handling bitcoins as well, as the cryptocurrency would not be legally acknowledged as the kind of thing such businesses are allowed to deal in. (There are similar regulations worldwide, though they differ by country and region.)

It's good news for bitcoin: Acknowledgement by a major economy (as opposed to calls to ban it) suggests legitimacy, or at the very least, a presence in the global financial market that can't be ignored.