The alleged insolvency of MtGox has far reaching effects that may be as long lasting for cryptocurrencies as the fallout at Chernobyl. While short term effects like the price instability will most likely rebound with time, regulators and critics are looking at this unfolding story and finding a leveraging post, pushing for stronger regulation to mitigate risks that are inherent with the digital currency.
Senator Tom Carper (D-Del.) released a statement today, condemning the news from MtGox and issuing concerns about an unregulated environment. “The disturbing news today from Japan is a reminder of the damage potentially ill equipped and unregulated financial actors can wreak on unsuspecting consumers,” Sen. Carper stated. “U.S. policymakers and regulators can and should learn from this incident to protect consumers.”
Protecting customers means regulating bitcoin and other cryptocurrencies to prevent failures like that of MtGox in the future. “For months, our Committee has been calling on law enforcement, industry, and relevant regulators to come to the table and engage in meaningful dialogue to provide clear rules of the roads for entrepreneurs, investors, and consumers,” Sen. Carper said. “Without these rules, businesses can’t be successful and consumers can’t be protected.”
He’s not the only policy maker who has been following this case. Superintendent Ben Lawsky of the New York Department of Financial Services sees this as an example of why regulation is so important. “While all the facts surrounding the situation at Mt. Gox in Japan are not yet clear, these developments underscore that smart, tailored regulation could play an important role in protecting consumers and the security of the money that they entrust to virtual currency firms.”
Both Lawsky and Sen. Carper have consumers in mind. However, some bitcoin innovators don’t see harsher regulation that way. Makers of the bitcoin vending machine Lamassu are concerned over how regulation might turn out for entrepreneurs looking at the emerging bitcoin market as a place for potential business growth. Recently, Eric Stromberg, owner of Enchanted Bitcoins, moved to Albuquerque from San Francisco to install and operate his Lamassu machine, citing the heavy regulations already imposed by California as the reason he left the state.
Erik Voorhees, outspoken bitcoin proponent and founder and CEO of Coinapult, a bitcoin payment processor, spoke out last night on the popular website Reddit. He called for his “brothers” to see the fall of MtGox as a bump in the road, not the end of times. “The proper lesson, if I may suggest, is this: We are building a new financial order, and those of us building it, investing in it, and growing it, will pay the price of bringing it to the world. This is the harsh truth. We are building the channels, the bridges, and the towers of tomorrow's finance, and we put ourselves at risk in doing so,” Voorhees said. He also stated that he lost 550 bitcoin on the exchange.
Senator Carper closed his statement by concluding that regulators have a role to take, but not one of overarching power. “When it comes to policy, it is the responsibility of the federal government to steer the boat, not row the boat,” Sen. Carper said. “Our Committee will continue to work closely with relevant U.S. government entities to steer the boat away from nefarious actors - and it’s up to legitimate, law abiding industry partners to row the boat into law abiding waters.”
Bitcoin Policy Makers See MtGox Fallout As A Warning, Insist On The Need To Regulate
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