The government of Japan has announced that it intends to increase oversight of illegal transactions that are carried out using digital currencies like bitcoin.

The news comes amid increasing fears in the country that criminal organizations are using bitcoin for money laundering and drug dealing, according to a new report from Kyodo News International.

Japan’s Ministry of Economy, Trade and Industry is now expected to set in motion a plan for how it will monitor illicit trade involving digital currency, working with other government agencies such as the Financial Services Agency and National Police Agency in the process.

Notably, domestic law enforcement officials completed their first bitcoin-related drug arrest last week when a 38-year-old citizen was arrested for allegedly importing illegal stimulants.

Defining bitcoin

Kyodo News reports that Prime Minister Shinzo Abe’s administration also plans to issue a formal classification for digital currencies.

Under the proposal, bitcoin and other similar technologies would be labeled as a new type of “value-added electronic record” – similar to credit card and electronic money records, not as a currency.

Government officials further suggested that they will not be seeking to apply capital gains taxes to bitcoin transactions, as the US has done, though it may apply taxes to purchases.

Seeking investment

In addition to its increased oversight of potential criminals, Japanese officials indicated that they will put off plans to regulate or otherwise introduce new rules on the domestic trading of digital currencies.

Kyodo News states that while Japan has no laws governing digital currencies, many legislators believe such market controls are needed. However, the suggestion of regulation may not be hostile, as the report says Japan is considering courting digital currency investment in a bid to bolster its overall economy.

The news notably follows speculation that Japan would seek to introduce new market controls following the demise of major bitcoin exchange Mt. Gox, the Japan-based business that filed for bankruptcy in February.

At the time, Japanese officials suggested they would look to pursue bitcoin regulation as part of an international effort.

Image credit: skyearth / Shutterstock.com