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Bitcoin Holders Resigned to Losses as Japan Probes Mt. Gox

Wednesday, 26 February 2014 07:34 AM

Japanese authorities began investigating Mt. Gox, the Tokyo-based Bitcoin exchange that shut down this week, amid calls for regulation of the digital currency as customers face losses.

The Financial Services Agency, Finance Ministry and police are examining the closure of Mt. Gox, Chief Cabinet Secretary Yoshihide Suga said. Officials from the FSA, the ministry and the Bank of Japan said they didn’t have responsibility for overseeing Bitcoin. Mt. Gox has been subpoenaed by U.S. prosecutors, the Wall Street Journal reported.

Kolin Burges is among the customers who stand to lose their Bitcoins after Mt. Gox went offline amid reports that more than $390 million of the virtual currency may have been stolen. The news triggered renewed calls for more security and consumer protection from U.S. officials, while Democratic Party of Japan lawmaker Tsutomu Okubo called on his government to rectify the lack of regulation.

“The authorities’ stance that they don’t have responsibility is disgraceful,” Okubo, a former vice finance minister who also used to work at Morgan Stanley, said in a telephone interview. “We need to establish a legal system.”

Police Probe

Bank of Japan board member Koji Ishida said he expects the government to make a proper decision on Bitcoin rules, including whether to embark on regulation. The digital currency has faced problems including the risk of money laundering and extreme price volatility, he told reporters.

The Tokyo Metropolitan Police Department is in talks with Mt. Gox customers after it received inquiries from them, a police official said by phone, asking not to be named in accordance with department policy.

“I have 311 Bitcoins in there so I expect to lose those,” said Burges, a trader of the digital currency who has been protesting outside Mt. Gox’s office in Tokyo’s Shibuya district for more than a week. “I will be finding out if there is any hope of recovering any coins and probably getting a lawyer to help with this.”

Karl-Friedrich Lenz, a law professor at Tokyo’s Aoyama Gakuin University and a Mt. Gox customer, said the events at the exchange stem from the regulatory vacuum.

“The Mt. Gox case is a good example of what happens if you ignore existing Japanese law requiring a bank license for taking deposits,” said Lenz, adding that he has a “small amount” at the exchange. “Solid regulation is necessary” for Bitcoin to be adopted more widely, he said.

The Finance Ministry doesn’t oversee Bitcoin because it’s not defined as a currency under Japanese law, an official said. An FSA official said that while the agency isn’t in charge of Bitcoin, it’s collecting information and monitoring the matter. The BOJ isn’t in a position to regulate the virtual currency, a central bank official said. The people all asked not to be named, citing their institutions’ policies.

Price Rebounds

Bitcoin prices surged 12 percent to $596.55 at 5:25 p.m. Tokyo time after slumping to as low as $418.78 Tuesday, according to the CoinDesk Bitcoin Price Index. Prices have retreated from as high as $1,151 on Dec. 4.

Mt. Gox lost 744,408 Bitcoins, according to a document posted to the Internet that appeared to be an internal strategy paper. The exchange “can go bankrupt at any moment, and certainly deserves to as a company,” according to the paper, which was posted online by blogger Ryan Galt.

A person briefed on the situation at the company, who asked to remain anonymous because the document is internal, said he believed it is authentic. It lists no contact information and no one has publicly verified its legitimacy at Mt. Gox, which hasn’t answered an e-mail and voice message seeking comment.

Digital Mattress

The exchange went offline to “protect the site and our users,” according to a statement on its website, which is otherwise blank. “We will be closely monitoring the situation and will react accordingly.”

Jimmy Wan, a 36 year old software engineer living in Tokyo, said he bought “several” coins from Mt. Gox after the exchange halted withdrawals earlier this month, hoping to take advantage of falling prices.

“If the situation was healthy and Mt. Gox was down for maintenance, I would have thought there would be a more elegant way to notify your users instead of the just hitting the panic button,” Wan said. He may acquire more Bitcoins from a different vendor, preferring to stash them in his own “digital mattress.”

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Japanese authorities began investigating Mt. Gox, the Tokyo-based Bitcoin exchange that shut down this week, amid calls for regulation of the digital currency as customers face losses.
bitcoin,digital currency,mt gox,japan
Wednesday, 26 February 2014 07:34 AM
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