Bitcoin Saga: Mt. Gox Missteps Give Regulators A Boost

Bitcoin Saga: Mt. Gox Missteps Give Regulators A Boost
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Now that the initial shock of seeing one of Bitcoin’s biggest platforms go under has passed, people are starting to realize that if Mt. Gox goes bankrupt, any assets deposited there are probably just gone. A document online that is supposed to be a contingency plan for Mt. Gox indicates that the company had just $32.75 million in assets to cover $174 million in liabilities. While both of those figures are probably a lot smaller now that the price of Bitcoins has dropped, the gap between them remains.

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Mt. Gox provides rallying point for regulators

While Bitcoin investors are mostly early adopters who are more aware of the risks they face than the average person would be, Bitcoin has gotten a lot of buzz this past year, and anyone who decided check out the cryptocurrency would have eventually stumbled on Mt. Gox. After months of problems, many investors have already put their money elsewhere, but better rates at Mt. Gox kept those with higher risk appetite (or those who don’t follow the Bitcoin world closely) from withdrawing until it was too late. The anonymous, high-risk nature of Bitcoin has had regulators’ attention for a while now, but the Mt. Gox collapse has given them a rallying point.

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“Bitcoin in many ways is terra incognita for the regulatory system,” said former SEC commissioner Joseph Grundfest, report Joseph Ax and Karen Freifeld for Reuters. “The lack of clarity about formal regulatory status provides no safe harbor for liability for criminal fraud.”

Bitcoin businesses are being subpoenaed, US Senator Chuck Schumer is calling for a Bitcoin ban, and Japanese regulators are opening their own investigations. For a currency premised on the idea of avoiding oversight, it has certainly drawn a lot of attention.

Mt. Gox could be acquired instead of going bankrupt

Although the situation looks grim, Mt. Gox hasn’t actually declared bankruptcy yet, and there is one sign that another platform could be interested in acquiring it. Mt. Gox CEO Mark Karpeles put a notice on the company website saying that he is still working hard to resolve the situation, but his assurances are sure to draw skepticism at this point.

More encouraging was the line of html that said “put announce for mtgox acq here.” If someone else is interested in acquiring Mt. Gox there is still hope that depositors will get some of their money back. But, as people are becoming acutely aware, there are no guarantees when it comes to this unregulated industry. Just because another company is acquiring Mt. Gox’s name, or employees, or anything else, doesn’t necessarily mean they are going to honor its debts.

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Michael has a Bachelor's Degree in mathematics and physics from Boston University and Master's Degree in physics from University of California, San Diego. He has worked as an editor and writer for several magazines. Prior to his career in journalism, Michael Worked in the Peace Corps teaching math and science in South Africa.
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