Japan to regulate virtual currency

With the arrest of the CEO of the now defunct cryptocurrency exchange and as international calls grow for tightening control of cybermoney due to the risk of their abuse for money laundering and terrorist financing, the Japanese government is considering the legal regulation of virtual currencies such as bitcoin.

According to Japantimes, Finance Minister Taro Aso said the government would consider new regulations on virtual currencies such as the introduction of a registration or license system for operators of cybermoney exchanges. The Finance Ministry, the Financial Services Agency and the National Police Agency are expected to work with other relevant authorities to amend the anti-money laundering law and possibly the law on transaction in financial products, with a view to submitting related bills to the regular Diet session next year.

Even internationally, the calls for regulating the virtual currencies have been growing as difficulties in tracking down the funds converted into cybermoney make the digital currency a preferred choice for money laundering, financing for terrorist groups and other criminal activities.

Japan's government is exploring new regulations on virtual currencies in response to a report in June by the Financial Action Task Force (FATF), entitled, "Guidance for a risk-based approach to virtual currencies" that recommended all exchanges be registered and licensed so that they would be subject to the same kinds of scrutiny as other financial services and money transfer businesses, and urged governments to require operators of cybermoney exchanges to confirm the identity of clients, keep digital records of transactions and report any suspicious transactions to authorities, the report said.

As some countries have started imposing regulations on virtual currencies, the Japanese government will need to coordinate its planned regulations with other countries' moves. Along with preventing the abuse of the virtual currency transactions for money laundering and criminal purposes, the regulations should aim to protect the interests of cybermoney users.