TOKYO (AFP) - Japan's government said on Friday that Bitcoin is not a currency but that it "is natural" that transactions involving the virtual unit should be taxed.
"As a matter of common sense, if there are transactions and subsequent gains, it is natural... for the finance ministry to consider how it can impose taxes," Chief Cabinet Secretary Yoshihide Suga told reporters.
His comments, in the wake of the spectacular failure of the Tokyo-based MtGox trading exchange last week, come as the government studies formal regulations for the unit after its reliability was called into question.
Regulators around the world are grappling with how to handle the currency.
US Federal Reserve head Janet Yellen has said the Fed had no powers over a currency that only exists virtually with no central authority behind it.
Several countries, including Russia and China, have heavily restricted how Bitcoins can be used.
A Japanese government statement issued on Friday said that Bitcoin "does not fall under the category of a currency and is subject to taxation", according to Jiji Press news agency.
Asked whether Japan would become a global leader on regulating Bitcoin, Mr Suga said: "We are now sorting things out under the current law and mulling what the government can do."
The MtGox collapse set off alarm bells over Bitcoin, which backers have promoted as a low-cost alternative to traditional currencies such as the US dollar or Japanese yen.
Bitcoin is generated by complex chains of interactions among a huge network of computers around the planet.
MtGox, which at one time reportedly processed 80 per cent of global Bitcoin transactions, last week sought bankruptcy protection and admitted that it lost half a billion dollars worth of the digital currency.
This week, an alleged theft by hackers forced a Canada-based online business serving Bitcoin traders and investors to shut down.