Japanese Government Says Bitcoin 'Not a Currency', Forms Investigation Committee

Japan's ruling party, the Liberal Democratic Party (LDP) has launched an investigative committeehttp://www3.nhk.or.jp/news/html/20140305/k10015738271000.html into bitcoin, and issued a statement saying it is "not a currency, but taxable".

In what has become a familiar refrain from authorities around the world in recent months, the government has also blocked related banks from "brokering bitcoin transactions or opening accounts holding the virtual unit". Exactly what constitutes a 'bitcoin account' remains unknown, but it presumably refers to one with a known bitcoin service like Blockchain.info or Coinbase.

This is likely a reaction to the international attention Japan has received after the collapse of Mt. Gox, which had its headquarters in Tokyo. Despite its hand being forced to make a statement by the Mt. Gox crisis, the Japanese government is generally curious about bitcoin and will not make any further statements on the matter until it has discussed matters with local bitcoin interests, a government representative said.

Representatives of the recently-formed Japan Digital Money Association, an advocacy group founded by Japanese bitcoin users and cryptocurrency miners, also consulted with LDP members with lawyers on Friday to present their case.

Obligatory statement

Bitcoin "does not fall under the category of a currency" as defined by Japanese law, Friday morning's statement noted.

"Generally speaking it is subject to taxation if it meets conditions laid out in income tax law, corporate tax law and sales tax law, among others."

Adding that there were no Japanese laws defining bitcoin, the statement concluded that if bitcoin was used for money laundering, "that would constitute a crime".

"As a matter of common sense, if there are transactions and subsequent gains, it is natural... for the finance ministry to consider how it can impose taxes," Chief Cabinet Secretary Yoshihide Suga said.

Staying out of it

Prior to this, Japanese authorities and the nation's central bank had been silent on bitcoin, steering clear of the kind of warnings heard from other countries.

The LDP promised it would make a further statement on bitcoin and how the government intended to tax it in the coming week.

Bitcoin exchange Kraken also sent a message to the LDP's Chairman of Special Mission Committee on IT Strategy, offering to share the company's knowledge of bitcoin and the exchange business.

Japanese bitcoin users will have to sit patiently and wait to see what happens next. The government has not specified a timeframe for release of conclusions but will probably mull over the details for some time.

Tokyo image via Shutterstock