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Mt. Gox collapse could ultimately help strengthen Bitcoin: US regulator

Mt. Gox collapse could ultimately help strengthen Bitcoin: US regulator

By Reuters | Updated: 4 March 2014 10:14 IST

The collapse of the Mt. Gox Bitcoin exchange could ultimately strengthen the virtual currency industry by weeding out weaker operators and prompting more supervision, New York's banking regulator said on Monday.

Japan's government, however, said it was still trying to figure out how the Tokyo-based company, once the world's biggest Bitcoin exchange, could lose nearly half a billion dollars worth of the virtual currency in a short period, and whether crime was involved.

"We still have not had a clear grasp of the situation," Finance Minister Taro Aso said on Tuesday after a cabinet meeting. "(We) don't know if it was a crime or just a bankruptcy."

Mt. Gox filed for bankruptcy protection in Japan on Friday, saying it may have lost some 850,000 Bitcoins due to hacking into its faulty computer system.

(Also see: Mt. Gox Bitcoin exchange files for bankruptcy, hit with lawsuit)

The collapse was another setback for the virtual currency, which started circulating in 2009 and is accepted by some online retailers. Yet many believe the electronic currency will survive. Its proponents like the fact that its value relies on a network of computers and is not tied to any government or central bank.

Benjamin Lawsky, superintendent of New York's Department of Financial Services, told Reuters that Mt. Gox's collapse was part of a "shaking out".

"It's on the one hand a setback, on the other hand it will cause further improvements in this industry and some more regulatory involvement," he told Reuters on the sidelines of a banking conference in the nation's capital.

Lawsky wants to attract healthy Bitcoin operators to the state, and has floated the idea of launching a "BitLicense" to regulate operators, and to align any new rules with existing financial regulation.

The agency hoped to have more to say this week about how it was writing the new rules and considering how to allow Bitcoin business in the state, Lawsky said.

He identified one Bitcoin exchange the agency is talking to: Barry Silbert's SecondMarket Holdings, modelled after the New York Stock Exchange.

"We've had several applications. I wouldn't say they're on hold but they're being worked on, on a parallel path to moving the regs," Lawsky told reporters. "Ask me later this week, we are working on that."

© Thomson Reuters 2014

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