When 700,000 Bitcoins Vanish, You Can Expect New Regulation
In the picture above, Mt. Gox CEO Mark Karpeles apologizes for losing all his customers' bitcoins during a press conference Friday in Tokyo, Japan.
Mt. Gox, the Tokyo-based Bitcoin exchange, filed for bankruptcy on Friday. The move intensified calls for regulation of Bitcoin, Reuters reports, which could have a profound impact on companies that accept the digital currency and startups building Bitcoin businesses.
Mt. Gox CEO Mark Karpeles said during a press conference in Tokyo that the exchange, which was the largest in the world, has most likely lost more than $450 million worth of its own and customers' bitcoins, according to The New York Times. The exchange suspended withdrawals on February 7 and its website features only a letter from Karpeles asking customers to wait for its issues to be resolved.
A document leaked to the media from Mt. Gox said that 744,408 bitcoins, accounting for about 6 percent of the 12.4 million bitcoins currently in circulation, went "missing" due to series of cyberattacks, Reuters reports. Entrepreneurs, investors, and members of the Bitcoin Foundation say that Mt. Gox's troubles are due to poor management and software problems, not the Bitcoin protocol itself.
The exchange's bankruptcy has ignited debates over the need for more regulation of Bitcoin and other virtual currencies. Jiro Aichi, Japan's vice finance minister, said new regulation should be an international effort in order to avoid any loopholes, Reuters reports.
On Thursday, U.S. Federal Reserve chair Janet Yellen told the Senate Banking Committee the Fed has no jurisdiction over Bitcoin. Yellen suggested Congress should start talks about how to further regulate Bitcoin and other virtual currencies.
Many Bitcoin users, investors, and entrepreneurs believe that over-regulation will end up killing innovation and only serve to make Bitcoin startups move out of the U.S.
Fred Wilson, the co-founder of venture capital firm Union Square Ventures, wrote in a blog post Thursday that officials should not overreact to Mt. Gox's bankruptcy: "When something as new and as different as Bitcoin emerges, it is tempting to want to 'put the genie back into the bottle' and protect ourselves from it. But thankfully the U.S. did not do that with the Internet."
WILL YAKOWICZ | Staff Writer | Reporter, Inc.com
Will Yakowicz is a staff writer for Inc. magazine. He has covered business, crime, and local politics for The Brooklyn Paper and was the editor of Park Slope Patch. He has also reported in the West Bank and Moscow for Tablet Magazine. He lives in Brooklyn, New York.