News / Economy

Beyond Mt. Gox, Bitcoin Believers Keep Faith, See More Robust System

Kolin Burges, a self-styled cryptocurrency trader and former software engineer from London, holds up a placard to protest against Mt. Gox, in front of the building where the digital marketplace operator was formerly housed in Tokyo, Japan, Feb. 26, 2014.
Kolin Burges, a self-styled cryptocurrency trader and former software engineer from London, holds up a placard to protest against Mt. Gox, in front of the building where the digital marketplace operator was formerly housed in Tokyo, Japan, Feb. 26, 2014.

Related Articles

Reuters
The apparent collapse of Tokyo-based bitcoin exchange Mt. Gox isn't bothering Anthony Hope and others who have ditched steady careers in government and finance to build bitcoin companies - and who stand to lose money they have in Mt. Gox.

Hope, a former British Treasury official and now head of compliance at Hong Kong-based MatrixVision, says that while Mt. Gox's fate is unclear, its troubles form part of a wider shift as more professional players move into the bitcoin mainstream.

“It's good for us as a business, not so good for us as consumers,” he said. “Over the longer term it will be good for bitcoin because over time the entire ecosystem will be made more robust.”

Steve Beauregard, CEO and founder of Singapore-based GoCoin, is more blunt about Mt. Gox's woes, “It's important in the sense of sweeping away a lot of the early unsophisticated folk who got into this and made a name for themselves, but didn't have the management horsepower to manage a company.”

Mt. Gox, at one time the biggest bitcoin exchange, abruptly stopped trading this week amid reports on the internet that more than 744,000 bitcoins - worth around $380 million at prevailing rates - had been stolen. If accurate, that would mean around 6 percent of the world's 12.4 million bitcoins minted would be missing.

The exchange's CEO Mark Karpeles told Reuters in an email that his company was “at a turning point” and would issue a statement “soon-ish.” His LinkedIn profile reads, “I have a long experience in company creation, and experienced almost any imaginable kind of trouble.”

On Wednesday, Japan said its authorities were looking into the Mt. Gox closure, and The Wall Street Journal reported that the virtual currency's exchange had received a subpoena from federal prosecutors in New York. A spokesman for the U.S. Attorney's office in Manhattan did not respond to requests for comment.

Bitcoins created by enthusiast Mike Caldwell are seen in a photo illustration at his office in Sandy, Utah, Sep. 17, 2013.Bitcoins created by enthusiast Mike Caldwell are seen in a photo illustration at his office in Sandy, Utah, Sep. 17, 2013.
x
Bitcoins created by enthusiast Mike Caldwell are seen in a photo illustration at his office in Sandy, Utah, Sep. 17, 2013.
Bitcoins created by enthusiast Mike Caldwell are seen in a photo illustration at his office in Sandy, Utah, Sep. 17, 2013.
Also, the European Banking Authority warned bitcoin users they were on their own when it comes to losses from using unregulated online currencies, noting there is no safety net as with mainstream bank deposits. “Currently, no specific regulatory protections exist in the EU that would protect consumers from financial losses if a platform that exchanges or holds virtual currencies fails or goes out of business,” it said in a statement.

Bitcoins rallied more than 10 percent on Wednesday, trading at close to $580, according to coinorama.net, which tracks the rate on various exchanges.

'Finance has got boring'

While bitcoin's public image remains one of a network of subversive, libertarian geeks, the past year or so has seen a change in the kind of people launching start-ups, say Hope, Beauregard and others in the fledgling industry.

Hope's colleagues, for example, include a serial entrepreneur, a former Morgan Stanley mergers and acquisitions specialist and a respected figure from the bitcoin community. Hope handled banking policy, taxation rules and freezing suspected terrorists' assets for the UK government before he moved to Hong Kong.

Antony Lewis, meanwhile, joined Singapore-based bitcoin exchange itBit from Credit Suisse last November. His colleagues include a former hedge fund analyst, a venture capitalist who invested in IT start-ups on behalf of the Singapore government and a former forex spot trader. “Finance has got boring in the past five years,” Lewis said. “It's not fun, it's very backward looking and all the innovation is in virtual currencies.”

Such companies are examples of a maturing - not just of the kinds of people attracted to bitcoin, but of the specialist roles companies play in the nascent bitcoin ecosystem.

MatrixVision, for example, helps bitcoin exchanges integrate with the traditional banking system by complying with local laws and regulations, while GoCoin acts as a “PayPal for bitcoin users”, allowing merchants and others to accept bitcoins without the problems of currency volatility and security risk.

More discerning users

For sure, the crisis surrounding Mt. Gox is the worst the young crypto-currency has faced, damaging trust and challenging all bitcoin-related companies to respond.

“Other major players need to show they avoid the mistakes Mt. Gox made, which they are trying hard to do,” said Tomas Forgac, who founded Singapore-based Coin Of Sale, a service for merchants to accept bitcoins as payment.

That, adds Masa Nakatsu, a Japanese entrepreneur who this month founded his own bitcoin start-up, means bringing in more professional technology companies which are able to work with governments and central banks - a skill he says some of the early bitcoin players have not shown.

“Players will change,” he says, “as the characteristics of the market change.”

This shake-out is already underway as users learn to be more discerning about where to put or exchange their money.

ItBiT's Lewis says his exchange has seen a steady flow of funds and new accounts, with trading jumping to 10 times normal levels in just the past few days. “ItBit represents the next wave of exchanges where we care about customers and want to have a go at this,” he says.

Lewis points to key questions that users need to ask of exchanges before entrusting money to them: how easy are they to hack? How well capitalized is the company? Are the deposits insured?

ItBit, he says, ticks most of those boxes. Clients' bitcoin funds are held on a computer that's not connected to the internet, and doesn't even have a hard drive or network card. Only itBit's funds are used for transactions. It has reached out to auditing firms to inspect its procedures and holds regular meetings with global regulators. Such things aren't cheap, says Lewis, noting ItBit has raised $5.5 million “and we'll need more as regulation gets tighter.”

“The next generation of bitcoin companies will be run by people with previous experience of financial service companies and they will need to be capitalized like financial service companies,” he says.

'Vibrant ecosystem'

Beauregard, who divides his time between his Singapore start-up and his California home, says financing this won't be a problem. His GoCoin has raised $500,000 and is about to close out another round of funding. While the number of bitcoin companies raising six figure sums is limited, that will change, he said.

“Every venture capital firm will have to have their bitcoin plays in 2014,” he said. “Otherwise they'll be missing the single greatest asset class that's emerging at the moment.”

Hakim Mamoni, Hong Kong-based chief technology officer at bitcoin incubator Seedcoin, says a new raft of exchanges are set to appear in the months ahead. He declined to identify them, since most are operating in what the start-up world calls 'stealth mode.'

“That's why the Mt. Gox event is not troubling me,” he said. “I know we'll have a vibrant ecosystem in a few months.”

You May Like

Missouri Town Braces for Possible Racial Unrest

Situation in Ferguson hinges on whether white police officer will be indicted for August shooting death of unarmed black teen More

Video Ukraine Marks Anniversary of 1930s Deadly Famine

President Poroshenko compares Soviet-era ‘genocide’ to current tactics of pro-Russia rebels in Ukraine's east More

S. Philippines Convictions Elusive 5 Years After Election-related Killings

Officials vowed to deliver justice as the nation marked the anniversary of the country's worst political massacre that left 58 dead, more than half media More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
New Skateboard Defies Gravityi
X
November 21, 2014 5:07 AM
A futuristic dream only a couple of decades ago, the hoverboard – a skateboard that floats above the ground - has finally been made possible. While still not ready for mass production, it promises to become a cool mode of transport... at least over some surfaces. VOA’s George Putic reports.
Video

Video New Skateboard Defies Gravity

A futuristic dream only a couple of decades ago, the hoverboard – a skateboard that floats above the ground - has finally been made possible. While still not ready for mass production, it promises to become a cool mode of transport... at least over some surfaces. VOA’s George Putic reports.
Video

Video Falling Gas Prices Impact US Oil Extraction

With the price of oil now less than $80 a barrel, motorists throughout the United States are benefiting from gas prices below $3 a gallon. But as VOA’s Kane Farabaugh reports, the decreasing price of petroleum has a downside for the hydraulic fracturing industry in the United States.
Video

Video Tensions Build on Korean Peninsula Amid Military Drills

It has been another tense week on the Korean peninsula as Pyongyang threatened to again test nuclear weapons while the U.S. and South Korean forces held joint military exercises in a show of force. VOA’s Brian Padden reports from the Kunsan Air Base in South Korea.
Video

Video Mama Sarah Obama Honored at UN Women’s Entrepreneurship Day

President Barack Obama's step-grandmother is in the United States to raise money to build a $12 million school and hospital center in Kogelo, Kenya, the birthplace of the president's father, Barack Obama, Sr. She was honored for her decades of work to aid poor Kenyans at a Women's Entrepreneurship Day at the United Nations.
Video

Video Gay Evangelicals Argue That Bible Does Not Condemn Homosexuality

More than 30 U.S. states now recognize same-sex marriages, and an increasing number of mainline American churches are blessing them. But evangelical church members- which account for around 30 percent of the U.S. adult population - believe the Bible unequivocally condemns homosexuality. VOA's Jerome Socolovsky reports that gay, lesbian, bisexual and transgender evangelicals are coming out. Backed by a prominent evangelical scholar, they argue that the traditional reading of the bible is wrong.
Video

Video Ebola Economic Toll Stirs W. Africa Food Security Concerns

The World Bank said Wednesday that it expects the economic impact of the Ebola outbreak on the sub-Saharan economy to cost somewhere betweenf $3 billion to $4 billion - well below a previously-outlined worst-case scenario of $32 billion. Some economists, however, paint a gloomier picture - warning that the disruption to regional markets and trading is considerable. Henry Ridgwell reports from London.
Video

Video Mexico Protests Escalate Over Disappearances

Protests in Mexico over 43 students missing since September continue to escalate, reflecting growing anger among Mexicans about a political system they view as corrupt, and increasingly tainted by the drug trade. Mounting outrage over the disappearances is now focused on the government of President Enrique Pena Nieto, accused of not doing enough to end insecurity in the country. More from VOA's Victoria Macchi.
Video

Video US Senate Votes Down Controversial Oil Pipeline - For Now

The U.S. Senate has rejected construction of a controversial pipeline to transport Canadian oil to American refineries. The $5 billion project still could be approved next year, but it faces a possible veto by President Barack Obama. As VOA’s Michael Bowman reports, the pipeline has exposed deep divisions in Congress about America’s energy future.
Video

Video Can Minsk Cease-fire Agreement Hold?

Growing tensions between government troops and separatists in eastern Ukraine further threaten a cease-fire agreement reached two months ago in the Belarusian capital of Minsk. Critics of U.S. policy in Ukraine say it is time the Obama administration gives up on that much-violated cease-fire and moves toward a new deal with Russia. VOA's Scott Stearns has more.
Video

Video Chaos, Abuse Defy Solution in Libya

The political and security crisis in Libya is deepening, with competing governments and, according to Amnesty International, widespread human rights violations committed with impunity. VOA’s Al Pessin reports from London.
Video

Video US Hosts Record 866,000 Foreign Students

Close to 900,000 international students are studying at American universities and colleges, more than ever before. About half of them come from Asia, mostly China. The United States hosts more foreign students than any other country in the world, and its foreign student population is steadily growing. Zlatica Hoke reports.
Video

Video Ferguson Church Grapples with Race Relations

Many white residents of Ferguson, Missouri, say they chose to live there because of the American Midwest community's diversity. So, they were shocked when a white police officer killed an unarmed black teenager in August – and shaken by the resulting protests and violence. Some local churches are leading conversations on how to go forward. VOA’s Ayesha Tanzeem reports.

All About America

AppleAndroid

World Currencies

EUR
USD
0.8050
JPY
USD
117.90
GBP
USD
0.6376
CAD
USD
1.1259
INR
USD
61.655

Rates may not be current.