It was as inevitable as the sun rising in the east. The far east, in this case, over the Land of the Rising Sun.
The Mt. Gox currency exchange in Tokyo, where buyers and sellers dealt in the unofficial currency Bitcoin, collapsed recently. As it disappeared, so did some $400 million. That money may have been lost, or stolen. Nobody’s sure. What many are sure of is that this collapse shows the need for more regulation.
“The clear ends of Bitcoin for either transacting in illegal goods and services or speculative gambling make me wary of its use,” Sen. Joe Manchin, D-W. Va., wrote. “I urge the regulators to work together, act quickly, and prohibit this dangerous currency from harming hard-working Americans.”
And that’s the easy, almost automatic, political reaction these days. When something goes wrong, bring in a new layer of regulators. When Enron defrauded investors, Congress passed Sarbanes-Oxley. When banks struggled in 2008, Congress passed Dodd-Frank. If Bitcoin exchanges don’t work, it must be because of a lack of oversight.
It’s worth asking, though: who was hurt when Mt. Gox went belly-up? Bitcoin is an exotic currency swapped by computer geeks and speculators hoping to make a quick buck. It’s not a legal tender issued by a government, as a dollar or a yen or a ruble is.
The Washington Post notes that the exchange’s collapse was expected for weeks before it actually happened. Surely those buying and selling on this exchange understood the risks they were taking, and they chose to go ahead anyway. Caveat emptor and all that.
Further, as the Post reported a week after the collapse, the currency itself is doing fine, “trading nearly 10 percent higher Saturday than a week before. Each Bitcoin is worth more than $600 in recent trading.”
So instead of reading a eulogy for Bitcoin, let’s explore why people are turning to non-government issued currencies in the first place.