Bitcoin is at the head of the news again after a tumultuous two weeks of the BitInstant Exchange CEO arrested for money laundering, Apple store kicking out the Bitcoin ‘Blockchain’ app and now Bitcoin prices have crashed over the last few days once again! This time Mt. Gox, a major bitcoin exchange headquartered in Tokyo, abruptly announced it was suspending all withdrawals for ‘technical’ reasons, reports The LA Times late Friday.
Mt. Gox said the suspension was temporary, but didn't say when customers' funds would again be available. It promised there will be an "update," though not a resolution, on Monday.
On the news, bitcoin prices, which had been quoted at $1,038 on Mt. Gox as recently as Jan. 26, fell below $700 Friday before settling in the mid-$700s.
Many bitcoin advocates see the virtual currency as a viable answer to the manipulation of ‘fiat’ currencies (dollars, euros, yen, etc.) by central banks, but those central banks generally have an interest in maintaining stable values for their currencies, or at least in not presiding over crashes of 28% in a matter of days.
Bitcoin was the answer in 2009 by the person or person using the pseudonym, Satoshi Nakamoto, who developed the algorithm to produce 21 million bitcoins in a peer-to-peer currency to thwart the greed of Wall Street bankers and financial leaders. Greed was not considered good in the development of the concept to produce bitcoins by programmers who are called ‘miners’ and produce a block of bitcoins for the fee of a small percentage of the bitcoin block they produced.
The role of Mt. Gox in the bitcoin universe illustrates how the lack of a central overseer, which bitcoin fans see as its principal virtue, undermines its stability and in all likelihood its acceptance. Loose oversight, but not any real governance, is provided by the nonprofit Bitcoin Foundation, where Mark Karpeles, the CEO of Mt. Gox, is a board member.
The company’s situation shows that some of the earliest businesses to embrace the bitcoin digital currency are now struggling to adapt now that the technology is moving into the mainstream. As more and more people use bitcoin and regulators begin to hold hearings and ask tough questions, an outfit like Mt. Gox, which is run by computer geeks, not financial experts, has no solid base or reference point to run a major financial exchange.
The fast evolving digital currency, Bitcoin, faced regulations in New York Jan.28 with possibly a BitLicense being issued posted on The N.Y. Times.
Benjamin Lawsky, New York’s Superintendent of Financial Services, said such regulatory guidelines would seek to bar misconduct like money laundering. He likened Bitcoin to the old and Wild West that needed a 'Sheriff' and regulation to bring into line a possible good alternative to high costs of wiring money and merchant credit card fees.
Those withdrawals were frozen on Friday, after several days of rumors about solvency problems at Mt. Gox. The firms says customers' bitcoins still remain in their digital wallets--that is, their accounts at Mt. Gox--and will be available once its technical ‘issue is resolved.’
China had suspended Bitcoin transactions through third parties and the Chinese banking system last December. Bobby Lee, CEO of the Bitcoin exchange BTC China, has announced that customers are once again able to purchase Bitcoin by depositing RMB directly into the company’s corporate bank account.
Regulation should help calm the wide swings in one area of illegal activities while the technical difficulties are resolved to a smoother process in doing business to provide a client the ability to access the bitcoin wallet. That will require some skilled management.
Please, see articles below in Author’s suggestions and the video atop this article on the MT.Gox trading suspension today.