Japan Passes Bill to Regulate Bitcoin Exchanges

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bitcoin illustrationThe collapse of MtGox Bitcoin Exchange, which came on the heels of a scandal involving embezzlement of millions of dollars, has led to Japan passing a law to regulate virtual currencies, including bitcoin.

Fall of MtGox

It may be recalled that MtGox, one of the world’s most highly reputed and biggest bitcoin exchanges, fell in 2014 after reporting the theft of bitcoins worth nearly half billion dollars. The reputation of bitcoin took a beating when this news spread all over the world.

Last year, Japanese prosecutors charged Mark Karpeles, the French head of MtGox with embezzlement. It was alleged that he was directly responsible for the disappearance of virtual currency worth millions. Finally, MtGox admitted that it was responsible for the disappearance of bitcoins worth $480 million. When the virtual currency was discovered missing, the agency filed for protection on grounds of bankruptcy. Needless to say, investors were neither amused nor sympathetic.

At first the exchange blamed the disappearance on software bugs and said that hackers had gotten into the system and stolen the virtual currency. Later, Karpeles said that some of the lost currency was discovered in a cold wallet.

Investors demanded that the court should appoint administrators for the firm to publish its data, enabling experts worldwide to analyse exactly what happened at the exchange. Kraken, a digital asset exchange, says that some investors will soon get back their entire investments or at least part of it. Nobuaki Kobayashi, a trustee appointed by the court, says that as many as 24,750 creditors have been verified to receive claims worth US$2.41 trillion.

Virtual Currencies Now Regulated in Japan

On Wednesday, the Government of Japan passed a bill, which made the Financial Services Agency of the country responsible for regulating all virtual currency exchanges. According to this newly passed bill, virtual currency can be defined as something that has an “asset like nature,” owing to which it can be used to purchase services and products.

The new law requires virtual currency exchanges, including bitcoin exchanges, to register with the Financial Services Agency and establish procedures to verify the identity of all customers who open accounts with them.

According to a statement issued by the Financial Services Agency, the aim of the new law is to “tackle issues of money laundering and protect users.”

While virtual currencies such as bitcoin have several supporters, they have their fair share of critics too, who say that its lack of regulation and anonymity will be taken advantage of by criminals. On the other hand, bitcoin supporters say that the cryptocurrency, which began appearing in 2009, gives consumers an anonymous and efficient way to store and use their money online.

G7 Countries Move to Regulate Virtual Currency

Japan is not the only G7 country to pass a bill to regulate bitcoin. Many other G7 countries have either already introduced or are currently mulling over the pros and cons of introducing similar laws. During a meeting held last year, representatives of all these countries had spoken in favour of regulating Bitcoin.

June 6, 2016: • No Comments

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