Signup for our free newsletter:

Bitcoin Under Attack

Written By Brian Hicks

Posted May 31, 2013

Just a few months ago, not ever having heard the word “Bitcoin” wouldn’t have been all that unreasonable. At this point, however, the digital currency has become a mainstay in the media, attracting just as many supporters as it has critics. News coming out of Japan, however, shows that Bitcoin may be changing its ways – and not everyone is pleased.

bitcoin pileCNBC reports that Bitcoin’s largest exchange, Mt. Gox, has announced plans for changes in its code of conduct. No longer will the exchange operate on the level of anonymity that it has up until now. The exchange will now be requiring members to verify themselves in order to make currency deposits or withdrawals.

“The Bitcoin market continues to evolve, as do regulations and conditions of compliance for Mt. Gox to continue bringing secure services to our customers,” said Mt. Gox in a press release release issued yesterday. “It our responsibility to provide a trusted and legal exchange, and that includes making sure we are operating within strict anti-money laundering rules and preventing other malicious activity.” 

Mt. Gox’s announcement on May 30th did not come with any grace period for users, as one might expect. Instead, members of the exchange were subject to verification as soon as the news broke yesterday.

According to the press release issued by Mt. Gox, however, Bitcoin deposits and withdrawals do not at this time require verification.

Tracing the Steps 

It should stand to reason that the decision on the part of Mt. Gox to require verification for all future currency withdrawals and deposits didn’t likely come out of nowhere. Instead, many are pointing to the shut-down by federal prosecutors of Liberty Reserve, a payment network not too dissimilar to Bitcoin. Prosecutors labeled the exchange a scam, specifically meant for money laundering purposes and other illegal activity. 

Regardless of what becomes of the Liberty Reserve case, those who are currently holding Bitcoins are becoming more and more nervous about what it could mean for the future of the digital currency. Restrictions such as the verification requirements set forth by Mt. Gox are being viewed as the beginnings to a slippery slope – one that could halt the currency’s dramatic growth rates. 

The Future of Bitcoin

For Bitcoin holders, the news that came out of Japan yesterday certainly didn’t help to calm any nerves. Instead, it has heightened fears as to where the currency may end up in the future.

At this point, however, it’s difficult to tell on what scale Bitcoin will actually be affected by the Mt. Gox decision and the fall of Liberty Reserve. It’s entirely possible that the currency will not be affected in a negative way and that other exchanges will begin to pop up as demand requires.

On the other hand, the signals coming out of Mt. Gox could provide for a convoluted future for Bitcoin, especially if they are a sign of more restrictive measures to come.

Even if Bitcoin survives these issues and ends up flourishing, Mt. Gox may find difficulty in the future. With the Liberty Reserve case making headlines, more and more people are paying attention to Bitcoin and the platforms on which the currency is traded. As the biggest Bitcoin exchange in the world, Mt. Gox is certainly not impervious to scrutiny by those who harbor skepticism over the currency. 

Bitcoin is a tricky subject when it comes to investment. After all, it has grown exponentially since first being introduced to the public just a few years ago, and with the opening of Bitcoin ATMs and the acceptance of the currency at a number of stores and restaurants around the world, to shrug it off as a complete and utter fad wouldn’t be quite fair. On the other hand, the currency is not without its problems, and it may still be in a major bubble at the moment. 

One thing’s for sure – if you own Bitcoin, you’ll want to pay attention to how things develop with Mt. Gox and other exchanges. Given the fact that the currency is so new, it’d be next to impossible for anyone to truly lay out what will end up happening with the currency. It could surely continue to flourish, but a handful of red flags are no doubt beginning to pop up.


If you liked this article, you may also enjoy: