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Japan makes Bitcoin-linked drug arrest: police

TOKYO -- A suspected drug importer who allegedly used Bitcoin to pay his Mexican suppliers has been arrested in Japan, police said Friday, in reportedly the country's first case of its kind.

Police forces in Tokyo and the southwestern city of Fukuoka teamed up for the operation to arrest Ayumu Teramoto, 38, on suspicion of buying a “stimulant drug” from abroad, a spokesman for Tokyo Metropolitan Police said.

It was not clear what the drug was, but the phrase is often used to describe substances such as cocaine or methamphetamine.

Media, including national broadcaster NHK, said it was the first time someone had been arrested in Japan for a drug transaction that involved Bitcoin.

While the virtual currency is yet to gain broad-based acceptance in Japan, its profile has been given a boost by the recent collapse of Tokyo-based MtGox, once the world's largest Bitcoin exchange.

Teramoto used Bitcoin to buy some 50 grams (nearly two ounces) of the drug, worth 3.5 million yen (US$34,500), NHK said, citing police sources.

The package arrived at Narita airport near Tokyo, concealed inside a tablet computer, NHK said.

Tokyo police declined to discuss financial and other details of the suspected deal, only confirming that Teramoto used an online service to import the drug via the United States and was arrested on Wednesday.

The arrest will likely give support to critics of the virtual currency movement, who say its anonymity and lack of regulation make it ideal for use by criminals.

Bitcoins were used by dealers on the underground Silk Road website, where U.S. prosecutors say buyers could use it to purchase drugs and even to organize assassinations.

Bitcoins are generated by complex chains of interactions among a huge network of computers around the planet and are not backed by any government or central bank.

MtGox is going through bankruptcy proceedings after it admitted that it had lost 850,000 coins, worth nearly US$500 million at the time due, in what it blamed on security lapses.

The Japanese government has banned banks from brokering Bitcoin transactions or opening accounts holding the virtual unit.

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