The debate about the legitimacy and longevity of virtual currency has become a global one as bitcoin has risen from a fringe entity relegated to geeks’ forums to a foremost concern for regulatory agencies in many countries. The U.S. is struggling to figure out a format for approaching the regulation of the currency that is notorious for its volatility in value, and association with illegal online markets such as the Silk Road. But now other countries are exploring ways to possibly regulate the trade and use of the virtual currency as it becomes increasingly obvious that the currency is not disappearing from markets any time soon.
In fact, bitcoin is scheduled to technically exist well into the next century. The last bitcoin will be mined in 2140, and until then, the global community is figuring out a way to regulate the currency that has already made its way into the bank accounts, ATMs, and financial lives of many people through its trading forums.
The collapse of MtGox last week has this very notion of the legitimacy of the bitcoin trading center in question. As one of the largest forums for trading bitcoins, MtGox filed for bankruptcy in Japan describing its loss — either of security hacking or other unknown or undisclosed means — as close to $500 million worth of bitcoins.
U.S. Federal Reserve chair Janet Yellen has already stated that the Federal Reserve has no authority to regulate bitcoin because it exists outside the banking industry. Japan’s financial regulators have responded to the MtGox closing because the site was based in Japan. According to The New York Times, Japan’s top government spokesman, Yoshihide Suga stated: “Once we assess the situation, we will respond as necessary. At the moment, we are still in the information-gathering stage.”
Several U.S.-based regulators and technology entrepreneurs and investors have piqued the public interest in Bitcoin as a popular and widely used currency — despite its connections to illegal activity and susceptibility to hacking — and are seeking to sanction its trading values with the government. The Winklevoss twins — famous for their claim against Mark Zuckerberg that Facebook was their idea — met with regulators in New York last month to discuss the regulatory possibilities for the virtual currency.
Of course, the Winklevoss twins have a vested interest in bitcoin as they own approximately 1 percent of what exists of the currency. But the fate of bitcoin is very much up in the air, particularly after the collapse of MtGox. What the U.S. and other countries decide to do in the face of bitcoin’s volatility and the mystery surrounding its origins and its perpetuity is very much yet-to-be determined.