A week after Mt. Gox collapse, Japan struggles to understand bitcoin

A week after Mt. Gox collapse, Japan struggles to understand bitcoin

3:49am EST

By William Mallard

TOKYO (Reuters) – A week after the collapse of Mt. Gox, Japan is still struggling to craft a response to the bitcoin phenomenon, saying the crypto-currency is not legal tender, though it might be taxable and subject to money-laundering controls.

In its first detailed response to the bankruptcy of the Tokyo-based company, once the world’s biggest bitcoin exchange, the government issued a statement assessing how bitcoin is covered – or more often, not covered – by existing law.

The issue took on new prominence in Japan on February 28, when Mt. Gox sought Chapter 11-style bankruptcy protection, saying it had lost bitcoins and cash worth some half a billion dollars due to hacker attacks.

Bitcoin is not a currency, but could be taxable under some circumstances, the statement says. Although the government understands that bitcoin is not issued or backed by any government or central bank, “we have not grasped the situation in its entirety.”

The authorities are monitoring the Mt. Gox bankruptcy process and, if necessary, will consider a response, said Chief Cabinet Secretary Yoshihide Suga.

Fewer than 1 percent of Mt. Gox’s 127,000 creditors are Japanese, the company has said. Yet across the government, officials are wrestling with how to handle bitcoin.

“It’s not money,” said Finance Minister Taro Aso. “Does the Financial Services Agency have jurisdiction? The Finance Ministry? The Consumer Affairs Agency? The Ministry of Economy, Trade and Industry?” he asked at a regular news conference. “Opinions are divided.”

The government statement, citing 18 sections of 11 laws and regulations, says bitcoin is not a currency or an asset within the purview of professional trading or asset management, while trading the virtual currency is not a banking or financial-instrument transaction.

But, generally speaking, bitcoin could be taxable if it meets certain conditions of income, corporate or consumption tax laws, the statement says. This leaves open the possibility that bitcoin could be treated as a commodity like gold, although the statement does not specify this.

Regarding money laundering, certain transactions – whether with bitcoin or not – require people to identify themselves, it notes.

The 6-page document is the government’s official response to questions posed by Tsutomu Okubo, a member of the opposition Democratic Party of Japan and former managing director at Morgan Stanley.

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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