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Just showing posts from September 2015

Mt Gox Update 

Posted by Lauren Rees | 0 comments
25Sep2015

(Original blog located at: https://cyberlawandregulation.wordpress.com/)
One of the Law departments researchers Dr Clare Chambers-Jones has posted up update blog on Mt Gox a digital currency exchange which has caused authorities to question its legitimacy.

This exchange was a leading exchange based in Japan and failed to comply with US money laundering regulations. The problems with Mt Gox stated when it was sued by CoinLab which is a Seattle start up. CoinLab claimed that Mt Gox failed to reach a conclusion over an agreement to go into business which would have seen CoinLab being in control over Mt Gox’s North American’s accounts[1]. The benefit of the partnership would have been the legitimisation of Mt Gox’s business ventures in North America because CoinLab is regulated withFinCen to provide Bitcoin exchanges.[2]  This lack of cooperation with Coin Lab has led to another fraction with the law as MutumSigillum a US Intermediary for Mt Gox, has had its accounts ceased. MutumSigillum was found to be not in compliance with the US money transmitter rules and regulations. Mt Gox was using this US intermediary as a means of exchanging Bitcoins in North America. It appears that Mt Gox deliberately sought intermediaries who did not want or were not regulated by regulators in the US. This in turns casts speculation over the legitimate use of the exchange. The troubles at Mt Gox continue as the COE of MtyGox is a Mr Mark Karpeles, yet he is also the owner of Mutum Sigillum. It is important to state that Bitcoins themselves were not being directly target by US authorities but it was their ‘criminal use possibilities’ which have caused regulators globally concern.[3]  It seems as if Bitcoins can be used as a currency for criminal activities and this in turn badly effects the legitimate possibilities of the digital currency. As  McMillan[4] highlighted legislate banking institutions are now avoiding using Bitcoins so as to not be tarnished with the taint of criminal activities. This can only be a bad thing for the legitimate use of Bitcoins and one which regulators must tackle head on. Calvery, Director of the Financial Crimes Enforcement Network, made mention to this in June 2013 when she acknowledged that digital currencies can and are used for criminal activities but that regulators must not forget the innovative advancements and financial inclusion these new technologies afford society and as such should not be over regulated.[5] However Bitcoins are unlike Mt Gox or even Liberty Reserve. The digital currency is not controlled by anyone and “operates as a much more transparent digital currency where money transfers can be tracked in public”.[6] It is the exchanges themselves which operate an anonymous service but not the collection of Bitcoins themselves.

In September 2015 Mark Karpeles was arrested in August in Japan on charges that he falsified data about how many Bitcoing Mt Gox held. He also faces charges that he funneled $1.7m Bitcoins towards other companies he owned before Mt Gox closed.

Also in August a Japanese court ruled against a man seeking compensation through the loss of money following the demise of Mt Gox saying that the currency was “not subject to ownership”[7] and thus not not applicable to seek repayment. This worrying stance by Japan on the legal status of digital currencies once again shows how the lack fails to keep pace with the changing economic technology.

[1] Hill, K. (2013a) The Feds are cracking down on Mt. Gox (not on Bitcoin). 15 May 2013. Forbes. https://www.mtgox.com/ accessed 9 January 2014.

[2] Hill, K. (2013a) The Feds are cracking down on Mt. Gox (not on Bitcoin). 15 May 2013. Forbes. https://www.mtgox.com/ accessed 9 January 2014.

[3] Hill, K. (2013a) The Feds are cracking down on Mt. Gox (not on Bitcoin). 15 May 2013. Forbes. https://www.mtgox.com/ accessed 9 January 2014.

[4] McMillan, R. (2013) Bitcoin shunned by Big banks as Mt Gox halts dollar payouts. Wired.com. 21 June 2013. http://www.wired.co.uk/news/archive/2013-06/21/mt-gox-stops accessed 9 January 2014.

[5] Calvery, J.S.  (2013) Remarks of Jennifer Shasky Calvery, Director Financial Crimes Enforcement Network. The Virtual Economy: Potential, Perplexities and Promises United States Institute of Peace, Washington, DC, June 13 2013. http://www.fincen.gov/news_room/speech/html/20130613.html accessed 9 January 2014.

[6] McMillan, R. (2013) Bitcoin shunned by Big banks as Mt Gox halts dollar payouts. Wired.com. 21 June 2013. http://www.wired.co.uk/news/archive/2013-06/21/mt-gox-stops accessed 9 January 2014.

[7] BBC News, (2015) Former Bitcoin exchange boss charged in Japan. http://www.bbc.co.uk/news/technology-34221871 accessed 14 September 2015.

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