What was once the world’s largest trading platform for bitcoin disappeared this week, stoking concern about the future of the digital currency.
Tokyo-based Mt Gox abruptly stopped trading on Monday amid reports that 744,000 bitcoins (€307 million) had been stolen. Its sudden closure hammered home the risks of a virtual currency that has seen a meteoric rise over the past year.
Bitcoin is not governed by any central bank, company or government, a status making it more difficult for those who invested in the currency to seek redress when things go wrong.
The currency was created in 2009 by an unknown person or group by the name of Satoshi Nakamoto, and doesn’t exist in a physical form.
Thus unlike regular bank notes, which have serial numbers that can be tracked, thefts of bitcoin are extremely difficult, if not impossible, to trace.
Even Mark Karpeles, chief executive of Mt Gox, has described bitcoin as a "high risk investment".
“If you buy bitcoins, you should buy keeping in mind the value could be zero the day after,” he said.
However, it is important to remember that the disappearance of the Mt Gox marketplace, and possible theft of bitcoins, won’t be the first time money has been stolen or a financial firm has gone under, leaving depositors with nothing.
While critics say the Mt Gox shutdown proves the unregulated currency is far from ready for widespread use, bitcoin advocates still hold out the hope for the digital currency. Prominent bitcoin supporters say the apparent collapse of Mt Gox is an isolated case of mismanagement that would weed out “bad actors”.
Either way, the crisis surrounding Mt Gox is certainly the worst digital currency has faced. But is it the end of the road for the cryptocurrency?
The Mt Gox crisis hasn't changed the enthusiasm of online retailer Overstock.com, which began accepting bitcoin in January. "If we didn't use greenback dollars because a bank or two failed, the greenback would never have gotten off the ground," Overstock.com executive vice-chairman Jonathan Johnson told the Wall Street Journal .
