The
most prominent Bitcoin exchange appeared to be on the verge of collapse
late Monday, raising questions about the future of a volatile
marketplace.
On
Monday night, a number of leading Bitcoin companies jointly announced
that Mt. Gox, the largest exchange for most of Bitcoin’s existence, was
planning to file for bankruptcy after months of technological problems
and what appeared to have been a major theft. A document circulating
widely in the Bitcoin world said the company had lost 744,000 Bitcoins
in a theft that had gone unnoticed for years. That would be about 6
percent of the 12.4 million Bitcoins in circulation.
While
Mt. Gox did not respond to numerous requests for comments, and the
companies issuing the statement scrambled to determine the exact
situation at Mt. Gox, which is based in Japan, the news helped push the
price of a single Bitcoin below $500 for the first time since November,
when it began a spike that took it above $1,200.
But
at the same time that the news about Mt. Gox was emerging, a New York
firm announced plans to create an exchange that could draw the world’s
largest banks into the virtual currency market for the first time.
Video|2:33
Credit
Bitcoin Believers
While regulators debate the pros and cons of
bitcoins, this volatile digital currency inspires the question: What
makes money, money?
The
new exchange is being put together by SecondMarket, which rose to fame a
few years ago after creating a platform for buying and selling shares
of companies like Twitter and Facebook before they went public.
Without
the trouble at Mt. Gox, the SecondMarket plans would have been seen as a
major boon for virtual currencies, providing a potential entry point
into the Bitcoin market for large banks, which have so far avoided
virtual currencies as their price has skyrocketed.
Barry
Silbert, SecondMarket’s chief executive, said that he had already
talked with several banks and financial companies about joining the new
exchange, along with financial regulators, and that he hoped to have it
in operation this summer.
But
plans for any new venture will be tested by the collapse of Mt. Gox,
which could shake the faith of early Bitcoin adopters. Ryan Galt, a
blogger who writes frequently about Bitcoin and was one of the first to
circulate the news about Mt. Gox, wrote on Monday:
“I do believe that this is one of the existential threats to Bitcoin
that many have feared and have personally sold all of my Bitcoin
holdings.”
On Monday, Mt. Gox took down all of its previous posts
on Twitter, one day after its chief executive, Mark Karpeles, resigned
from the board of the Bitcoin Foundation, a nonprofit that advocates for
virtual currencies.
A statement from the chief executives of Bitcoin companies like Coinbase, Circle, Blockchain.info
and Payward, said that the “tragic violation of the trust of users of
Mt. Gox was the result of one company’s abhorrent actions and does not
reflect the resilience or value of Bitcoin and the digital currency
industry.”
The events are in keeping with the stark ups and downs of Bitcoin’s short existence.
Released
in 2009 by an anonymous creator known as Satoshi Nakamoto, the Bitcoin
program runs on the computers of anyone who joins in, and it is set to
release only 21 million coins in regular increments. The coins can be
moved between digital wallets using secret passwords.
While
Bitcoin fans have said the technology could provide a revolutionary new
way of moving money around the world, skeptics have viewed it variously
as a Ponzi scheme or an investment susceptible to fraud and theft.
Many
leading names in the Bitcoin community were still trying to determine
the scope and potential consequences of the troubles at Mt. Gox. A
document detailing the purported theft, labeled “Crisis Strategy Draft,”
appeared to come from Mt. Gox.
While
officials at the Bitcoin Foundation could not verify the origins of the
document, they were preparing for the closure of Mt. Gox.
Patrick
Murck, the foundation’s general counsel, said that “this incident just
demonstrates the need for initiatives by responsible individuals and
responsible members of the Bitcoin community like what’s being
described” in SecondMarket’s initiative.
Mt.
Gox’s difficulties this week are only the latest in a long line of
problems at the Tokyo-based exchange. Created in 2010, Mt. Gox quickly
became the most popular place to buy and sell Bitcoins. But the firm has
suffered several intrusions and technological mishaps, which have led
to steep declines in the currency’s price. A few weeks ago the company
stopped allowing its customers to withdraw Bitcoins after it said it had
discovered a flaw in some of the basic Bitcoin computer code.
While
other exchanges were briefly hit by problems, they came back online.
Mt. Gox never opened up again, prompting speculation about its future.
Until
now, the major Bitcoin exchanges have all allowed anyone from the
public to buy and sell virtual currency. SecondMarket’s plan is to
create a platform more like the New York Stock Exchange, where only
large institutions can join and trade.
Mr.
Silbert says he will only open the exchange once they have several
regulated financial institutions signed on as members. His hope, he
says, is to give them partial ownership so that they have an incentive
to trade there.
For much of Bitcoin’s life, banks have viewed the virtual currency with either derision or dismissiveness.
Recently,
though, a number of banks have released research reports that have been
less negative. A December report from Bank of America said that virtual
currencies could become an important new part of the payment system,
allowing money to move more cheaply than it does with credit cards and
money transmitters like Western Union.
The
statement from the Bitcoin companies on Monday night, which was not
signed by Mr. Silbert, said that “in order to re-establish the trust
squandered by the failings of Mt. Gox, responsible Bitcoin exchanges are
working together and are committed to the future of Bitcoin and the
security of all customer funds.”
No comments:
Post a Comment