|
 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.
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.
[to top of second column] |
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
capitalised 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 capitalised 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."
(Additional reporting by Chris Peters in BANGALORE, Kazuhiko Tamaki
in TOKYO, Huw Jones in BRUSSELS and Lionel Laurent in PARIS; Editing
by Ian Geoghegan)
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