As if the drama surrounding what was once the world’s biggest BitCoin exchange wasn’t enough, today we come to you with news that Mt.Gox is filing for bankruptcy protection. The New York Times reports that the Bitcoin exchange is claiming to have filed for bankruptcy protection in Japan, where the exchange is based. The rumor that was spreading a few days ago regarding the exchanges loss of nearly all of their customers’ coins may have in fact turned out to be true as they are still not quite explaining why they need to file for bankruptcy protection.
While this isn’t necessarily the end of BitCoin, this is certainly a rude awakening for many because while BitCoin may be a decentralized currency, it isn’t fool proof. And even more importantly, because it isn’t centralized or regulated by any governmental bodies, BitCoin theft is rampant and hard to prevent against. Even more worrying is that there are no guarantees that your BitCoins are protected in the event of an exchange or online wallet going bankrupt. So, even if the exchange were to recover many of the lost BitCoins, they wouldn’t necessarily be obligated to pay out any guaranteed insurance amount like the FDIC guarantees when you deposit your funds in an FDIC insured bank.
I believe that cryptocurrencies will continue to exist and thrive, but this will put a huge damper on the growth of these currencies, especially if the global economy picks up a bit and local currencies get stronger. I don’t think anyone can really say where cryptocurrencies are going now, especially after this Mt.Gox fiasco, but some people think that the failure of Mt.Gox is a good thing for cryptocurrencies in the long term because of how unprofessional it was as an exchange. I guess we’ll just have to see how things pan out of the course of the next few months and years and whether or not Mt.Gox demise was the nail in the Cryptocurrency coffin, or just a rebirth.