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Japan minister calls bitcoin 'collapse' expected

Feb 28 2014, 3:56am CST | by , in News | Misc

Japan minister calls bitcoin 'collapse' expected
 
 

TOKYO (AP) — Japan's finance minister scoffed at bitcoin woes as inevitable Friday, and Vietnam banned the virtual currency, but enthusiasm was undimmed among its supporters in the aftermath of the apparent collapse of a major exchange.

The unplugging earlier this week of the Tokyo-based Mt. Gox bitcoin exchange and accusations it suffered a catastrophic theft have drawn renewed regulatory attention to a currency created in 2009 as a way to make transactions across borders without third parties such as banks.

Mt. Gox's CEO Mark Karpeles has said in a web post he is working to resolve the problems. He has not denied a widely circulated document that says the exchange suffered the theft of more than 740,000 bitcoins, which would amount to about $370 million at current prices. Such a loss would be a giant setback to the currency's image because its boosters have promoted bitcoin as immune to counterfeiting or theft.

"No one recognizes them as a real currency," Japan's Finance Minister Taro Aso told reporters. "I expected such a thing to collapse."

Aso, known for his blunt language, said that a predictable outcome for bitcoin had come even sooner than he had expected.

Japan's financial regulators have been reluctant to intervene in the Mt. Gox situation, saying they don't have jurisdiction over something that's not a real currency. They pointed to the Consumer Affairs Agency, which deals with product safety, as one possible place where disgruntled users may go for help.

The agency's minister Masako Mori urged extreme caution about using or investing in bitcoins. The agency has been deluged with calls about bitcoins since earlier this year.

"We're at a loss for how to help them," said Yuko Otsuki, who works in the agency's counseling department.

Other countries have reacted sternly.

Vietnam's communist government said Thursday that trading in bitcoin and other electronic currencies is illegal, and warned its citizens not to use or invest in them.

Late last year, China banned its banks and payment systems from handling bitcoin, although people still use them online. Thailand earlier put a blanket prohibition on using bitcoins and Russia has effectively banned them.

Karpeles, who has disappeared from the public eye, said Wednesday on the otherwise blank Mt. Gox website that he was working with different parties to fix "our recent issues." He did not say when trading might resume. That may mean those with bitcoins at Mt. Gox have no way of ever getting them back. For now, they have no way of getting their money out.

But there was still considerable appetite for bitcoin in China, where it has become attractive as an investment since tightly-regulated state banks offer very low interest rates on deposits.

Even some with money tied up in Mt. Gox were undaunted.

Huang Zhaobin, a 21-year-old student in Chengdu, said he had lost 50,000 to 60,000 yuan ($8,125 to $9,750) from the Mt. Gox closure.

"Actually this money itself is the benefit from bitcoin investment," said Huang, who plowed 10,000 yuan into bitcoins about three months ago.

"If it is legal, I will continue to invest for sure as it is the trend in the world."

Zhou Ming, 30, an art editor in Fuzhou, was not overly worried about the problems. He said his initial investment of 20,000 yuan ($3,200) in 2011 had grown to about 300,000 yuan ($48,700).

"For the bitcoin investors who started early like me, this does not matter too much as we've already made much money earlier."

In Singapore, Tembusu Terminals, a joint venture specializing in crypto-currencies, announced Friday its first bitcoin ATM in the city-state and plans for many more. Other outfits in Asia have also announced similar ambitious plans.

Yang Weizhou, analyst at Mizuho Securities Co. in Tokyo, said laws to regulate virtual currencies may have to be created by countries including Japan.

The trend toward such technology for peer-to-peer payments wouldn't replace traditional money but was here to stay because of its convenience, she said.

"It is undeniable," she said. "One must separate the Mt. Gox problem from the overall concept."

It's hard to know how many people around the world own bitcoins, but the currency has attracted outsize media attention and the fascination of millions as an increasing number of large retailers such as Overstock.com begin to accept it.

Speculative investors have jumped into the bitcoin fray, too, sending the currency's value fluctuating wildly in recent months. In December, the value of a single bitcoin hit an all-time high of $1,200. In the aftermath of the Mt. Gox collapse Tuesday, one bitcoin stood at around $470.

Roger Ver, a Tokyo resident who has provided seed capital for bitcoin ventures such as Blockchain.info, a registry of bitcoin transactions, said he believes bitcoin will survive, possibly emerging with better technology that's safer for users.

He said Mt. Gox people were likely sincere but had failed to run their business properly.

"Mt. Gox is a horrible tragedy. A lot of people lost a lot of money there, myself included," said Ver. "I hope we can use this as a learning experience."

 

__

Associated Press video journalist Kaori Hitomi in Tokyo, researcher Fu Ting in Shanghai and writers Chris Brummitt in Hanoi, Vietnam and Satish Cheney in Singapore contributed to this report.

Follow Yuri Kageyama on Twitter at twitter.com/yurikageyama

Source: AP

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