On Friday, Feb. 28, Mt. Gox filed for bankruptcy protection in a Tokyo court. The Mt. Gox exchange stopped trading entirely earlier in the week, on Monday, Feb. 24, and had stopped all withdrawals from the site earlier in the month due to fraud and security issues.

 

(Related: Mt. Gox Shuts Down, Skeptics Worry and Other Exchanges Take It’s Place)

 

In a statement issued in Tokyo, CEO Mark Karpelés stated that technical problems had opened the door to fraudulent activity on the Mt. Gox site, which once handled more than 80 percent of bitcoin trading. When asked to send a message to investors, Karpelés simply repeated the apology that he had given at the press conference. The site lost about 750,000 of its customer’s bitcoins, as well as 100,000 of its own.  Taken together, the total amount lost would be worth anywhere between $470 and $490 million, depending on which market you are trading in and which exchange rate you are using.

 

Others have argued that the site was in a dire financial situation, regardless of the hacking issues. Mt. Gox reported earnings of only $380,450 in 2012, and had $5 million seized from its account by U.S. agents for allegedly lying on bank statements.

 

Mt. Gox’s bankruptcy filing brings the two questions that have always surrounded bitcoin back to center stage: 1) is it a viable currency moving forward?, and 2) how can it be regulated in an effective manner? Bitcoin enthusiasts insist that the failure of Mt. Gox will not be the failure of the bitcoin system as a whole, though it has lost nearly 50 percent of its value since its highest trading point last year. As Jon Matonis reported to CNN earlier this week, “it’s not even possible for a single company or point to bring down the Bitcoin ecosystem…Bitcoin is massively resilient and it will indeed recover from this. The exchanges that are still in existence and operating will tend to be stronger because of this.”

 

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Federal Reserve Board Chair Janet Yellen (Mark Wilson/Getty Images)

Other countries have some regulatory system in place for the digital currency.  For instance, China and Thailand have decided to ban bitcoin, while Korea has stated that it will not recognize it as legitimate. Senator Joe Manchin has called on US financial regulatory agencies to take action. In response to questioning, Federal Reserve Board Chair Janet Yellen explained why the Feds cannot regulate:

 

 

Bitcoin is a payment innovation that’s taking place outside the banking industry. To the best of my knowledge, there’s no intersection at all, in any way, between Bitcoin and banks that the Federal Reserve has the ability to supervise and regulate. So the Fed doesn’t have authority to supervise or regulate Bitcoin in anyway.

 

Yellen asserted that it certainly would be within Congress’s jurisdiction to discuss the proper legal structure for dealing with bitcoin regulation.

 

In Tokyo, where Mt. Gox was headquartered, top government spokesman Yoshihide Suga  stated that multiple Japanese agencies have been keeping records on the online currency, gathering information with an eye towards regulation. Currently, Suga said, they are solely focused on gathering more information. However, Vice Finance Minister Jiro Aichi  has already stated that regulation of the crypto-currency should require international cooperation to avoid loopholes.

 

Is bitcoin a viable currency moving forward? Should it be more heavily regulated? Let me know your thoughts on these questions or any others in the comments section below or on Twitter @dannystevens91.