Mt Gox collapse could ultimately help bitcoin cause: NY regulator

WASHINGTON Mon Mar 3, 2014 4:52pm EST

Some of Bitcoin enthusiast Mike Caldwell's coins and paper vouchers, often called ''paper wallets'', are pictured at his office in this photo illustration in Sandy, Utah, January 31, 2014. REUTERS/Jim Urquhart

Some of Bitcoin enthusiast Mike Caldwell's coins and paper vouchers, often called ''paper wallets'', are pictured at his office in this photo illustration in Sandy, Utah, January 31, 2014.

Credit: Reuters/Jim Urquhart

WASHINGTON (Reuters) - The collapse of the bitcoin exchange Mt. Gox is part of a struggle for survival that could ultimately strengthen the virtual currency industry, New York's banking regulator said on Monday.

"It's on the one hand a setback, on the other hand it will cause further improvements in this industry and some more regulatory involvement," Benjamin Lawsky, superintendent of New York's Department of Financial Services, told Reuters.

"It's part of (a) shaking out," he said on the sidelines of a banking conference in the nation's capital.

Mt. Gox, once the world's biggest bitcoin exchange, filed for bankruptcy protection in Japan on Friday, saying it may have lost nearly half a billion dollars worth of the virtual coins after hackers gained access to its systems.

The collapse was another setback for the virtual currency, which started circulating in 2009 and is accepted by some online retailers. Proponents of the electronic currency like the fact that its value relies on a network of computers and is not tied to any government or central bank.

Lawsky wants to attract healthy bitcoin operators to the state, and has floated the idea of launching a "BitLicense" to regulate operators in the industry, and to align any new rules with existing financial regulation.

The agency hoped to have more to say this week about how it was writing the new rules and considering how to allow bitcoin business in the state, Lawsky said.

Lawsky identified one bitcoin exchange the agency is talking to: Barry Silbert's SecondMarket Holdings, modeled after the New York Stock Exchange.

"We've had several applications, I wouldn't say they're on hold but they're being worked on, on a parallel path ... to moving the regs," Lawsky told reporters. "Ask me later this week, we are working on that."

(Reporting by Douwe Miedema; Editing by David Gregorio)

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