Bitcoin disappearance shouldn’t have caught us by surprise
Bitcoin, defined as a “peer-to-peer technology,” was designed in 2009 for the purpose of making digital monetary transactions without the presence of a banking authority. The open software is available to everyone, and it’s run with the use of cryptography to control the exchange of funds. But with the recent embroilment of one of the network’s central hosts, Tokyo-based Mt. Gox, in a $409 million loss of investments, most economists may not want to get involved.
A “massive hack” is rumored to be the cause of customer outrage following the shutdown of Mt. Gox’s website on Feb. 25. Also at this time, the Mt. Gox Tokyo office was seemingly deserted by its employees. The following day, Mt. Gox chief executive Mark Karpeles released a statement on the site for concerned capital investors.
“I would like to use this opportunity to reassure everyone that I am still in Japan and working very hard with the support of different parties to find a solution to our recent issues,” Karpeles said.
With the inability to retrieve funds, many Mt. Gox users are left in the dark. When the site went offline, a handful of protestors gathered outside the corporation’s Tokyo office, despite its being vacant, claiming they had suffered significant losses in their virtual wallets. In a circulating document reported to be reflective of Mt. Gox’s real position, more than 744,000 Bitcoins were “missing” due to relentless cyber attacks over the expanse of several years.
Joseph Grundfest, a law professor at Stanford University and previous SEC commissioner, told Reuters, “The lack of clarity about formal regulatory status provides no safe harbor for liability for criminal fraud.”
This isn’t the first scandal the Bitcoin name has faced. In January 2014, Bitcoin CEO Charlie Shrem was arrested on charges of money laundering involving the digital black market known as Silk Road. According to criminal complaints, Shrem and another conspirator are accused of having sold more than $1 million worth of Bitcoins to those participating in the market, who would then buy illicit drugs.
Sen. Tom Carper of Delaware, chair of the Homeland Security and Governmental Affairs Committee, told Yahoo that Mt. Gox “is a reminder of the damage potentially ill-equipped and unregulated financial actors can wreak on unsuspecting consumers.”
Although many are infuriated by Bitcoin’s present instability, some have chalked up the downturn as just another crash, to be expected of “high-risk investments” like Mt. Gox, as Karpeles termed it in an interview with Reuters last spring. Hopefully, the standstill Mt. Gox is undergoing will foster the “solutions” it claims to be working towards. This extensive breach should serve as a warning to those choosing to invest virtual currency, as this technological era births new loopholes for danger.
The Commodity Futures Trading Commission is now contemplating the establishment of rules for Bitcoin’s digital trading. The Wall Street Journal reports that federal prosecutors in New York have subpoenaed Mt. Gox. Japanese authorities are also reported to be looking into the matter, acknowledging that a court case would most likely take place in the United States. With Karpeles still under wraps, there’s no telling what will become of Mt. Gox’s future and the millions lost to its investors.
As of 6:39 p.m. on Mar. 4, Bitcoin is priced at $671.22.
Opinion columnist Alex Meyer is a creative writing freshman and may be reached at [email protected]