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February 26, 2014 6:31 am
Japan’s chief cabinet secretary has said that the government is “watching closely” over events at Mt Gox, the troubled Bitcoin exchange, as regulators in Japan and the US move to tighten supervision of firms set up to handle the nascent virtual currency.
The Mt Gox website on Wednesday featured a one-line message to customers, explaining that the decision to shut down on Tuesday had been taken “to protect the site and our users”.
Yoshihide Suga said the Financial Services Authority, Japan’s main financial watchdog, would work in tandem with the National Police Agency to collect information on the shutdown of the Tokyo-based platform and would “take action” if necessary.
Wednesday’s remarks came after Mark Karpelès, Mt Gox chief, confirmed via email to Fox Business that a document purporting to outline a strategy for reviving the exchange was “more or less” legitimate.
The report, widely circulated online on Tuesday, detailed the loss, or theft, of 744,408 Bitcoins held by Mt Gox on behalf of customers. The coins would be worth about $415m, based on prices on other exchanges.
On Tuesday in the US, Benjamin Lawksy, the superintendent of New York’s Department of Financial Services, called for regulators to pay greater attention to virtual currencies and their exchanges.
“While all the facts surrounding the situation at Mt Gox in Japan are not yet clear, these developments underscore that smart, tailored regulation could play an important role in protecting consumers and the security of the money that they entrust to virtual currency firms,” he said.
Events at Mt Gox, once the world’s dominant Bitcoin exchange, have underscored the lack of official oversight of systems designed to trade and store the virtual currency, which is now accepted by more than 3,200 merchants worldwide.
Since Mt Gox imposed a freeze on customer withdrawals on February 7 – saying it could not be sure transactions had been processed properly until it had fixed a “bug” in its software – concerns had mounted that the exchange had been hacked and defrauded.
A pair of investors denied access to their coins spent days protesting outside Mt Gox’s headquarters in Tokyo’s Shibuya district, before being moved on by police last Friday. Fears that the coins were lost intensified on Monday, as Mt Gox pulled its Twitter feed, and on Tuesday, as it suspended all trading and shut down its website.
The uncertainties have caused the price of Bitcoin on other exchanges to drop by about one-third since Mt Gox halted withdrawals.
Mt Gox and Mr Karpelès could not be contacted for comment. In a statement that appeared on the website late on Wednesday evening, Mr Karpelès assured customers that he was still in Japan, and was “working very hard with the support of different parties to find a solution to our recent issues”.
In the US, regulators have taken a patchy approach to policing virtual currencies, with most action coming in the form of law enforcement and sanctions, rather than prescribing regulation.
US prosecutors have filed money laundering and other criminal charges against people who allegedly used virtual currencies and their platforms to launder money gained from other crimes such as buying and selling of illegal drugs.
Until now, financial authorities in Japan have disavowed responsibility for supervising Mt Gox. The ministry of economy, trade and industry, which regulates commodity exchanges and other industrial marketplaces, said Bitcoin is not a commodity. The FSA, which regulates money-transfer firms, said that Bitcoin does not qualify as money.
The Bank of Japan, which is supposed to guard the stability of the financial system, referred enquiries to a comment that Haruhiko Kuroda, governor, made in December, when he said that the bank’s monetary affairs department was “closely watching” the development of Bitcoin.
One government official familiar with the situation said that if the Mt Gox case were found to involve “criminal elements”, then the cybercrime unit of the National Police Agency, or its counterpart at the Metropolitan Police Department, would take control.
Not all Bitcoin users welcome the regulatory scrutiny. Tomoaki Ushida, president of Syncimage, a Tokyo-based web consulting company that accepts payment in Bitcoin, said that the appeal of the virtual currency is in “the absence of government involvement”.
“We don’t need a ministry in charge, as trading is a matter of individual responsibility,” he said. The current shutdown “is a problem for Mt Gox, not Bitcoin”.
Additional reporting by Mitsuko Matsutani
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