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 Commenting on the closure this week of Tokyo-based Mt. Gox, once the
world's biggest exchange for the bitcoin virtual currency, Aichi
said the ministry would respond to the problems "if necessary",
after finding out exactly what happened.
"It's not just the Ministry of Finance; many other agencies are
related," Aichi told a news conference. "As for its legal position,
a currency (under Japan's jurisdiction) would be coins or notes
issued by the Bank of Japan. At the very least, we can say bitcoin
is not a currency."
U.S. Federal Reserve Chair Janet Yellen, appearing on Thursday
before a Senate committee, said the Fed has no jurisdiction over
bitcoin but that Congress should consider ways to regulate such
virtual currencies.
The Mt. Gox website and Twitter feed went blank on Tuesday after
weeks of turmoil. It suspended withdrawals on February 7 following a
series of cyber attacks, leaving customers unable to recover their
funds.
A document circulating on the internet saying that more than 744,000
bitcoins - worth around $423 million at current rates - were missing
from Mt. Gox was created by a Tokyo-based consulting firm, said Ryan
Selkis, a blogger who initially leaked scans of the document. Selkis,
who uses the handle "twobitidiot", said in an email that the "Crisis
Strategy Draft" had been written by consulting firm Mandalah in
meetings with Mt. Gox CEO Mark Karpeles.
A director at Mandalah told Reuters the firm had never been
contracted by Mt. Gox to do "strategic planning" but declined to
comment further.
On Wednesday, Karpeles had sought to assure investors that he was
working with others to solve the problems. "As there is a lot of
speculation regarding Mt. Gox and its future, 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," he said in a statement posted on the
Mt. Gox website.
MT. GOX REBRANDING?
While proponents of bitcoin hail its anonymity and lack of ties to
traditional banking, regulators have become increasingly interested
in the digital currency due to its volatility and usage by criminal
elements.
Bitcoins are created, or "mined", in a process using a network of
computers that solve complex mathematical problems as part of a
process that verifies and permanently records the details of every
bitcoin transaction that is made. At current prices, the bitcoin
market is worth about $7 billion.
The document leaked this week by Selkis - who says he sold all his
bitcoins - said 744,408 bitcoins, or about 6 percent of the 12.4
million bitcoins in circulation, were "missing" due to thefts that
exploited "malleability" in the code governing transactions, which
the Bitcoin Foundation and others have blamed on Mt. Gox's
customized software.
"Mt. Gox has been broken and it was obvious there was something
really bad going on there for nearly a year. They were processing
withdrawals very slowly and generally being very opaque about what
was going," said Mike Hearn, a bitcoin developer in Switzerland.
The leaked crisis plan proposed that Mt. Gox reduce its liabilities,
switch off the exchange for a month while bringing in transition
advisers, and reset all social network channels while rebranding
under a different CEO.
Karpeles told Reuters in April 2013 that Mt. Gox was seeing daily
inflows of $5-$20 million. He told Forbes his company hadn't been
able to keep up with all the changes as it became the largest
exchange in the world.
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The crisis plan said Mt. Gox had liabilities of $174 million, based
on an assumed exchange rate of $160 per bitcoin - well below the
$550 or so offered for bitcoins at other exchanges on Thursday -
against assets of $32 million. A financial statement included in
that document said Mt. Gox was expected to make $2 million in net
income in the year to end-March, a sevenfold increase on the
previous year.
It also said Mt. Gox turned a profit in its second year of
existence, banking $286,000 in net income. Those figures match a
2013 report by credit research firm Tokyo Shoko Research, which was
reviewed by Reuters. It said Mt. Gox "had a strong start".
Mt. Gox had 600,000 customers at the time, the research report said
- 30 percent from the United States, 10 percent from Britain and
just 300 in Japan. Given that most users are overseas, any court
case to retrieve missing funds would be more likely in the United
States than Japan, said Ken Kiyohara, a lawyer at Jones Day. "It
probably comes under the (Japanese) Financial Services Agency's
(FSA) remit, but giving a reason for that in one sentence is
impossible," he said.
Officials at the FSA and Finance Ministry each told Reuters bitcoin
does not fall within their purview, while the Bank of Japan says
only that it is studying the bitcoin phenomenon, which Governor
Haruhiko Kuroda has called "interesting."
People who had bitcoins at Mt. Gox are more definitive.
"It was the only place you could buy bitcoin directly with yen, so
it hurts that it's gone," said Ryoichi Taga, a fellow at the Japan
Digital Money Association.
NOBODY HOME
Manhattan U.S. Attorney Preet Bharara has sent subpoenas to Mt. Gox,
other bitcoin exchanges and businesses that deal in bitcoins to seek
information on how they handled recent cyber attacks, a source
familiar with the probe said. A spokesman for Bharara declined to
comment.
Mt. Gox is under investigation by the U.S. federal law enforcement,
according to a second source familiar with the case, while a third
said the U.S. Federal Bureau of Investigation was monitoring the
situation.
The federal probe was spurred by information provided by the Bitcoin
Foundation, an advocacy group for the digital currency, Bloomberg
reported. The foundation could not be reached immediately for
comment. Karpeles, a founding member of the foundation, resigned
from its board on Monday.
In Singapore on Thursday, Tembusu Terminals set up what it said was
the city-state's first automated tele-exchange machine (ATM) for
buying bitcoins - at the downtown Spiffy Dapper bar - a week after
the finance minister said bitcoins weren't regulated by the ministry
or the central bank.
Karpeles' whereabouts in Japan were still unclear. The main Mt. Gox
office remained deserted on Thursday, with bubble wrap inside the
windows. The company said last week it was moving back to a previous
office for "security reasons". The company's cubicle in the other
office in Tokyo's Shibuya area was inaccessible.
A concierge at Karpeles' home - an upscale apartment near Shibuya -
appeared to speak to someone on the intercom before saying there was
nobody home.
(Additional reporting by Emily Flitter
and Chris Francescani in New York, Jim Finkle in Boston,; Chris
Peters in Bangalore, Bill Trott in Washington and Nathan Layne and
Takaya Yamaguchi in Tokyo; Editing by Ian Geoghegan)
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