Beyond Mt. Gox, bitcoin believers see more robust system

Office workers walk past a multi-tenant building, where Mt. Gox, a big bitcoin exchange is based in Tokyo. Bitcoins rallied more than 10% yesterday.

Reuters/Singapore

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 $380mn at prevailing rates – had been stolen. If accurate, that would mean around 6% of the world’s 12.4mn bitcoins minted would be missing. The exchange’s CEO Mark Karpeles told Reuters in an e-mail 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.”

Yesterday, 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 US Attorney’s office in Manhattan did not respond to requests for comment.

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% yesterday, trading at close to $580, according to coinorama.net, which tracks the rate on various exchanges.

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.

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.