Bitcoin exchange Mt. Gox goes offline

Bitcoin exchange Mt. Gox, once the largest of its kind, has disappeared from the Internet after its website went offline following rumors that it is battling insolvency. Visitors to the www.mtgox.com domain got a blank page when they tried to log on, more than two weeks after the firm suspended cash withdrawals as claims swirled of a bug in the software underpinning bitcoin. The website failure came after Japanese regulators said they were powerless to intervene in an episode that has cast doubt on the viability of the crypto-unit.

There is clearly something seriously wrong going on at the company. Before the website went down, there were reports that Mt. Gox had disabled all trading on its site in a hint that it may be planning major restructuring.

According to news of Forbes, Over 1 million people were Mt. Gox customers and they need to know what their immediate options are to deal with their financial losses.  First, it’s important to understand that Mt. Gox is not a bank and it does not protect its users with a system similar to the FDIC or Federal Deposit Insurance Corporation.  This means that there isn’t a neutral third-party protecting the money you held at Mt. Gox.  The FDIC provides insurance up to $250,000 dollars on deposits in bank accounts to help assure us that our money won’t evaporate, if the bank shuts down like Mt. Gox.

Mt. Gox. could have provided the same service by purchasing a separate insurance policy on their BTC deposits.  The insurance would’ve been on behalf of the 1 million users that have lost $409.2 million dollars overnight.  Unfortunately, Mt. Gox does not provide insurance or any assurances for an user’s account.  Thus, we’re left in the wind – cold and unprotected.

Mt. Gox’s failure is not the end of Bitcoin.  It is a single company failing in a large ecosystem.  The other major pillars in the community such as Coinbase, Kraken, Bitstamp, BTC China, Blockchain.info and Circle have issued public statements reiterating my thoughts.  Bitcoin has taken a stumble, but it is up to the community to determine whether this is a scrape they can recover from.  But, it’s important to realize that all wounds heal given enough time.