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Collapse of exchange spells trouble for bitcoin

February 25, 2014 • Business


FILE – This April 3, 2013 file photo shows bitcoin tokens in Sandy, Utah. The website of major bitcoin exchange Mt. Gox is offline Tuesday, Feb. 25, 2014, amid reports it suffered a debilitating theft, a new setback for efforts to gain legitimacy for the virtual currency. (AP Photo/Rick Bowmer, File)

TOKYO (AP) — The sudden disappearance of one of the largest bitcoin exchanges only adds to the mystery and mistrust surrounding the virtual currency, which was just beginning to gain legitimacy beyond the technology enthusiasts and adventurous investors who created it.

Prominent bitcoin supporters said the apparent collapse of the Tokyo-based Mt. Gox exchange was an isolated case of mismanagement that will weed out “bad actors.” But the setback raised serious questions about bitcoin’s tenuous status and even more tenuous future. At least one supporter said the blow could be fatal to bitcoin’s quest for acceptance by the public.

A coalition of virtual currency companies said Mt. Gox went under after secretly racking up catastrophic losses. The exchange had imposed a ban on withdrawals earlier this month.

By Tuesday, its website returned only a blank page. The collapse followed the resignation Sunday of CEO Mark Karpeles from the board of the Bitcoin Foundation, a group seeking wider use of the exotic currency.

Mt. Gox’s origins are rooted in fantasy instead of finance. The service originally specialized in trading colorful cards featuring mythical wizards and derives its name from a game. The initials stand for, “Magic: The Gathering Online Exchange.”

San Francisco-based wallet service Coinbase and Chinese exchange BTC China sought to shore up confidence in the currency by saying the Mt. Gox’s situation was isolated and the result of abusing Login to read more

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