It looks like the recent Mt. Gox debacle might actually have a silver lining for Bitcoin investors, given it is apparently leading to official recognition and regulation of the new digital currency in Japan. Japan-based Mt. Gox, formerly the world’s largest Bitcoin exchange, closed down and filed for bankruptcy protection after announcing that at least 850,000 Bitcoin had been stolen by hackers from company accounts.
Bitcoin was introduced in 2009, and currently nearly $10 billion worth of the digital currency are in circulation. New Bitcoin are produced as a reward for solving extremely complex math problems. Bitcoin was trading at around $670 as of 1 p.m. EST today.
Japan first major nation to regulate Bitcoin
While some true libertarians may see any governmental regulation of the Bitcoin as a bad thing, most more pragmatic sorts see it as an important step forward in the acceptance of the Bitcoin as a legitimate currency. So even if it does legally limit the use of Bitcoin, this plan by the Japanese government to regulate and tax Bitcoin can be seen as a landmark event in the nascent history of the virtual currency.
Details of the Japanese government plan to regulate Bitcoin
The regulation of Bitcoin came about by an opposition lawmaker inquiring regarding the Japanese government’s position on the digital currency’s legal status. The cabinet is formulating a response to become the basis for regulatory guidelines. Experts say these regulations would also apply to any other virtual currencies that appear in the future.
All profits derived from trading bitcoins on online exchanges, and purchases made using them will now be taxed. However, banks will be prohibited from dealing with the new crytptocurrency, and securities firms will also be banned from becoming involved as brokers for Bitcoin-related trades
In a global first, purchases made in Bitcoin will be subject to Japan’s consumption tax, which is increasing to 8% as of April 1. Trading gains are also subject to taxation, and companies will be required to pay tax on profits derived from Bitcoin transactions.