TOKYO â€" Bitcoin trading platforms like the now-defunct Mt. Gox exchange can, for now, operate freely under Japanese law, the government said Friday in a note that signaled a hands-off approach to the virtual currency.
In fact, Bitcoins are not a currency at all and are not subject to Japan’s stringent banking laws, officials said in a six-page paper that highlighted uncertainties more than clarifying the issues surrounding the digital payment system.
The paper did confirm that transactions using Bitcoins are not considered banking and that an exchange trading them does not need to obtain a banking license or meet compliance standards that such a license would require.
But Bitcoins’ status also makes them off-limits for Japanese banks, seemingly leaving the handling of them up to unregulated operators like Mt. Gox, the Tokyo-based exchange that filed for bankruptcy protection last week after losing half a billion dollars’ worth of its customers’ Bitcoins.
Like any other commodity, however, Bitcoins are subject to taxes in Japan, the paper said. It left unclear whether the simple purchase of Bitcoins would be subject to Japan’s 5 percent sales tax, which is set to rise to 8 percent in April.
Toshinori Matsushio, an official at the National Tax Agency, said that Bitcoin purchases were likely to be slapped with the sales tax unless they were singled out for exemption, much like postages stamps are in Japan. It would also be virtually impossible for the government to levy taxes on peer-to-peer sales.
In this regard, Japan’s regulatory approach seemed to differ from that taken by other countries. According to a statement this week by the UK Digital Currency Asociation, British revenue and customs officials are set to announce that virtual currencies should be treated almost identically to other currencies in terms of taxation. That would mean no sales tax on on Bitcoin sales.
Still, the paper stressed that discussions would continue on the details of how Bitcoins would be taxed, as well as the need for more regulation to better protect Bitcoin users. Japan “has not yet grasped a complete picture†of Bitcoins, the paper said, and various government agencies are still “collecting information.â€
Now that Bitcoin has been deemed beyond the limits of Japan’s financial regulator, basic oversight and the drafting of more detailed guidelines could be left to the Ministry of Economy, Trade and Industry or the consumer protection agency.
In a news conference, the top government spokesman, Yoshihide Suga, said investigations of the Mt. Gox collapse could make it necessary for the government to review or revise its response.
When asked to clarify how Bitcoins might be taxed, Mr. Suga chuckled but gave no details.
“Of course, the Finance Ministry would be thinking of various ways to tax it,†he said.
The government prepared its note in response to questions submitted to Parliament by an opposition lawmaker, Tsutomu Okubo, a former managing director for Morgan Stanley. The cabinet approved the paper Friday morning.
Colin Moreshead contributed reporting from Tokyo.
