Japan Studies Regulation of Bitcoin After Mt. Gox Goes Dark

TOKYO â€" A top government official said on Wednesday that Japan was studying possible ways to regulate Bitcoin trading in the wake of the implosion of a prominent Tokyo-based trading platform for the virtual currency.

Japan has no laws regulating the use of Bitcoin, and authorities here have seemed content to take a wait-and-see attitude on the currency and its recent ups and downs.

But on Wednesday, Yoshihide Suga, a top government spokesman, said that relevant authorities â€" including Japan’s Financial Services Agency, Finance Ministry and the police â€" were collecting information on the Bitcoin trade in Japan, with an eye on regulatory action.

“Once we assess the situation, we will respond as necessary,” Mr. Suga said at a news conference. “At the moment, we are still in the information-gathering stage.”

Japan’s new interest in Bitcoin comes as authorities around the world grapple with regulating, or even defining, a virtual currency whose trade has surged in recent years.

Japanese financial regulators had so far suggested that the virtual coins are a traded product, not a currency, and therefore remain outside their purview. Some in Japan, where Bitcoin adoption has been relatively slow, continue to question whether the currency is here to stay or a mere fad.

Koji Ishida, a member of the Bank of Japan‘s policy board, said that the bank saw limited use and adoption of Bitcoin. Instead, the central bank should focus on ensuring smooth fiat money transactions for now, Mr. Ishida told reporters outside Tokyo, according to the Nikkei website.

“Though some people might find it useful, its use is limited as a method of transaction,” Mr. Ishida said. The central bank would leave it up to the government to mull any regulatory steps, he said.

Users of the now seemingly defunct Mt. Gox Bitcoin exchange have said they would seek to meet with Japanese financial regulators to urge them to act against the secretive platform and help those seeking redress. Mt. Gox went dark on Tuesday amid rumors that hackers had swiped millions of dollars’ worth of the virtual currency from its systems.

In a statement on the company’s website on Wednesday, Mt. Gox’s chief executive, Mark Karpeles, said he was still in Japan and “working very hard with the support of different parties to find a solution to our recent issues.”

Mr. Karpeles also said that Mt. Gox employees had been instructed not to give out any information, and asked users to refrain from asking the staff questions.

Kolin Burges, a trader from London who flew to Japan this month after the exchange stopped paying out funds, said he was considering legal action to try to retrieve the money he invested in the exchange last month. But he conceded that there would not be much point in suing if the company itself had lost all of its funds.

Like their counterparts elsewhere, Japanese authorities head into unfamiliar territory in regulating a virtual currency. A relatively easy change for regulation would be to bring Bitcoin under the purview of Japan’s Payment Services Act, which oversees electronic money, shopping points and escrow transactions, according to a person with knowledge of the Financial Services Agency’s thinking. Such a move could enforce new limits on Bitcoin transactions, including transaction size.

While Bitcoin has faced relatively little scrutiny here, it has invited comparisons to an infamous scandal involving”Enten,” an electronic currency used by a Tokyo company to defraud investors of billions of yen in the mid-2000s.

Some experts say that because of the sway physical cash still holds in Japan, with many businesses still refusing to accept credit cards and trusting only cash, Bitcoin adoption will be slow, reducing the need for regulators to move quickly.

“There just hasn’t been the need for Bitcoin in Japan as there’s been elsewhere,” said James MacWhyte, an early Bitcoin user and long-term Tokyo resident who is working to set up an association of Bitcoin users in Japan. He said the low adoption reflected the trust Japanese still seemed to hold in government institutions and government-issued money.

“No one has lost their pensions, the government hasn’t shut down, bank fees are reasonable, and electronic money is so fast and easy to use,” Mr. MacWhyte said. “But that could change.”

The general attitude among Japanese experts seems to be to let Bitcoin users be â€" but that anyone dabbling in virtual currencies should be aware of the risks.

“Its use should be left to those who find it’s useful,” Koji Sakuma, an economist at the Institute of Monetary Affairs, said in a research note this month.

“Those who buy it might incur losses as prices go wildly up and down,” Mr. Sakuma said, “but I don’t see it as a problem for those who choose not to get involved.”

Zhiyi Yang contributed reporting.