Via the WSJ (Mochizuki Takashi reporting).
Bitcoin is a security with very, very weak regulation. Essentially, like a 19th century stock or bond. People are using it as an alternative currency.
Bitcoin exists only in cyberspace, as a “virtual” thing. (You see where this is going.) The credit system is that you trade something of value in exchange for a Bitcoin balance. In this sense—and only this sense—the Bitcoin is like the balance ledgers of real currencies. Most people who are outside accounting don’t appreciate that today’s money mostly exists as ledger balances. The actual cash or metal component is just one aspect of money. Most money transactions don’t reduce to the paper/cloth form. It’s blip blip blip. In the 20th century in the US, it was write checks and take ledger balances up and down.
So Bitcoin traders are out there blip blipping. As long as they trust the counterparty to the transactions, the arrangement works. They are trading chits over the internet.
The problem is that there is no central bank issuing Bitcoin. Whereas modern currencies are backed, almost always, by the full faith and credit of the country or countries sponsoring the currency, Bitcoin is: You trust. You choose.
Karpeles, here in Tokyo, got himself involved in this enterprise through some software developer connections. They go around Tokyo like a little lordship class, breaking rules and screwing with people. Making up their own, “virtual” rules. When their activities hit up against real civil and criminal laws, out come a battery of excuses. It usually boils down to excuses that say that, since a computer was involved:
it wasn’t a crime,
it wasn’t a tort,
people “chose”,
people “trusted” and the perp shouldn’t be blamed,
there’s a dozen of these. A lot of these guys live in an extended adolescence.
It struck me that if a real financial institution in Japan was doing what Karpeles was doing, he would have been hauled in in early 2014. But he wasn’t. Why? Because it involved the computer, and the people made victim of it were foreigners, not Japanese. I think the Japanese government decided to square-peg this one into the “let the foreigners work it out among themselves” category. Especially this administration. “Foreigners lost money? Too bad. Get over it! Look how well we’ve gotten over Midway.”
Somewhere in the bureaucratic, clockwork-like gear shifting of the administration, however, someone must have realized that what Karpeles was doing was more akin to a first-degree con artist scheme than to “foreigners screwing around on the internet”. They maybe began to see Karpeles as a kind of low life. And now, some evidence turned up that Karpeles may not have been an internet transactions security expert, but he did know enough about it to transfer money to his personal account.
The Japanese are finally taking theft seriously. They finally see that, just because computers were used and the victims were mostly foreign people, the activity occurred in Japan and people were conned out of value. Money was stolen from them in the same way a con artist encourages you to invest in some phony scheme, and, then, once you hand over the money, you are dealt with excuse after excuse why you can’t have it back.
Japan should not be the forum for this kind of deceit. It is encouraging that this case is being reimagined as possible actual crime rather than foreigners screwing around over a money transaction they “chose” to do.
(I have had no Mt. Gox account of course.)
[Update: interesting blog commentary from Silicon Angle that puts it right, too.]
Hoofin 