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Japan Moves To Regulate And Tax Bitcoin

In Japan, transactions and gains of the virtual currency will reportedly be subject to taxes.

[Image: Flickr user antanacoins]

The unregulated nature of Bitcoin is what draws deviants, anarchists, and libertarians to the virtual currency. But concerns about its viability have been heightened with the bankruptcy of the largest Bitcoin exchange Mt. Gox and shuttering of Bitcoin bank Flexcoin in recent days, both after significant heists. As a result, the Japanese government will regulate the trade of Bitcoins similar to commodities such as gold, reports the Nikkei Asian Review. This will mark one of the first attempts by a major economy to regulate Bitcoin.

Subsequently, Bitcoin transactions and gains will be subject to Japanese taxes. The Nikkei Asian Review reports Japan will not allow security firms to broker Bitcoin trades, similar to regulations enacted in China. Enforcement will prove to be a tall task, as transactions are tied to online addresses, not user identities.

Just last week, Federal Reserve chairwoman Janet Yellen said in a Senate Banking Committee testimony that the central bank "does not have the authority to supervise or regulate Bitcoin in any way. This is a payment innovation that is taking place entirely outside the banking industry and to the best of my knowledge there is no intersection at all [between Bitcoin and banks]."