News Column

Bitcoin UPDATE2

February 28, 2014

TOKYO, Feb. 28 -- (Kyodo) _ (EDS: UPDATING)

Mt. Gox, a Tokyo-based major bitcoin exchange, filed for bankruptcy court protection on Friday, a sudden announcement after the exchange abruptly shut down all transactions of the virtual currency earlier this week.

Net current liabilities at Mt. Gox total around 6.5 billion yen, its chief Mark Karpeles said at a news conference in Tokyo, apologizing for the recent trouble that is believed to have impacted at least 1 million users of the exchange.

Karpeles admitted that the system was fragile. He said Mt. Gox was illegally accessed in early February and bitcoins may have been withdrawn, adding it has asked experts to carry forward procedures for filing a criminal complaint.

The exchange said it has lost about 11.4 billion yen worth of bitcoins, converted at Tuesday's rate, and up to 2.8 billion yen of deposits for users to purchase bitcoins.

A lawyer for Mt. Gox said at the same press conference that the exchange may be able to make a fresh start if financial backers appear and it resumes its system after finding out the cause of the trouble, though it is unclear when the liquidation will be completed.

Despite growing concern over the bitcoin market, there are currently no laws in Japan regulating the virtual currency.

Some government officials indicated that they will consider improving the legal framework to protect users of the virtual currency, which has been increasingly used as a means of online payment across the globe.

"The government must not crack down on everything, but we will study whether the existing legislation is incomplete or not," a Finance Ministry official said.

Finance Minister Taro Aso earlier in the day expressed his eagerness to hold discussions with other ministers and government agencies about the cause of the trouble at Mt. Gox.

"We do not clearly know what bitcoins are, so we have to start studying it," Aso said at a press conference.

On Thursday, Senior Vice Finance Minister Jiro Aichi said the government will consider whether to regulate bitcoins.

An official of the Financial Services Agency said, "Users of the (bitcoin) exchange have to take responsibility as they have maintained a position of not depending on the government."

The official, however, added that bitcoin transactions "are likely to be regulated internationally in the future to prevent money laundering."

Bitcoins have gained increasing attention among global investors since trading began around 2009, due in part to their ease of use in cross-border transactions.

Many countries have been trying to strengthen surveillance of the bitcoin market. In the United States, Sen. Joe Manchin, a member of the Senate Banking Committee, has sent a letter to federal regulators seeking a ban on the virtual currency, calling it "dangerous."

"This virtual currency is currently unregulated and has allowed users to participate in illicit activity, while also being highly unstable and disruptive to our economy," Manchin wrote.

Mt. Gox is one of the world's largest bitcoin exchanges. Six other major bitcoin exchanges worldwide have released a joint statement distancing themselves from the troubled operator in Tokyo.

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Source: Japan Economic Newswire

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