Bitcoin, a virtual currency circulated on the Internet, has attracted great attention.
The main benefit of the online currency is that it can be remitted at low fees, but unfortunately it can be exploited by criminals.
Unlike regular currencies, bitcoin is not under the control of central banks. We urge the Bank of Japan to investigate the bitcoin system in close cooperation with the monetary authorities of other countries and find out what problems exist.
The bitcoin system was reportedly developed around 2008 by a person calling himself Satoshi Nakamoto. Whether this is true is unknown.
Unlike the yen and the dollar issued by the central banks of Japan and the United States, bitcoin is not issued by a specific organization and has no physical bills and coins. The central banks of Japan and many other industrialized countries do not consider bitcoin an official currency, and it is illegal in Thailand.
Nevertheless, bitcoin has spread around the world online with a circulation equivalent to 1 trillion yen (about $9.8 billion). In the United States, bitcoin use has been increasing in the mail-order business and at stores.
The main benefit of bitcoin is the ease with which it can be remitted.
For example, if an overseas remittance is made by transferring a certain amount of yen to an overseas account after being converted into bitcoin, recipients do not have to pay local bank fees for conversion into local currencies if they do it themselves.
Fees are necessary to remit bitcoin, but they are much lower than ordinary exchange commissions.
Bitcoin is traded in units of BTC, and has hovered at about $800 per BTC lately. The problem is that the value of bitcoin fluctuates excessively.
When it was speculated last November that the Federal Reserve Board would recognize bitcoin, its market value shot up to about $1,200 per BTC from the about $13 recorded at the beginning of 2013.
In December, bitcoin plunged to about $500 per BTC after Chinese monetary authorities banned financial services involving the online currency.
Risk management is difficult for bitcoin, which stays outside the framework of financial regulations. Bitcoin users must accept responsibility in transactions.
As bitcoin deals are highly anonymous, there is concern they will be abused. In the United States, a trader who gave bitcoin to an illegal drug dealer faced prosecution on charges of money laundering. Boosting the level of oversight is crucial so as to discourage criminal behavior.