In the early days of cryptocurrency, fewer exchanges and platforms to purchase digital currencies existed. One of the most popular exchanges at the time was Mt. Gox. Launched in 2010, the Tokyo based website became one of the biggest bitcoin exchanges in the world. In 2013, more than 70% of the bitcoin transactions were handled by the platform. However, in 2014, Mt. Gox closed the exchange, shut down trading activities, and filed for bankruptcy. The company later claimed that 850,000 bitcoins vanished, stating that they were stolen. Customers were outraged and Mt. Gox became the newfound enemy of the crypto community. Later, 200,000 missing bitcoins were found, but it became clear that fraud and theft within the company were responsible for the “hack”. A lawsuit was filed, but most customers never got their money or assets back. The former CEO of Mt. Gox, Mark Karpelès is currently a fugitive in France.
Nowadays, there are a lot more platforms to purchase and exchange cryptocurrencies, the most popular one being Coinbase, which was founded in 2011. With these come higher risks of hacking and stealing, as cryptocurrencies gain traction and popularity around the world.
Japan is hoping to tackle these risks and wants to avoid another Mt. Gox type scenario in the future. The financial organization Mitsubishi UFJ Trust and Banking announced its plan to introduce a unique service that will cover and protect cryptocurrency traders and investors in the event of an attack or an exchange shutting down. Users will have the option to subscribe to the service for a fee, and in exchange will receive compensation in the event of losses due to hacking, fraud or theft. By agreeing to the service, investors will allow the organization to have access to their records and to obtain information from exchanges. However, it is still unclear if and how exchanges, who constantly put a strong emphasis on privacy and security of their clients, will agree to disclose information to Mitsubishi UFJ.
Will investors feel comfortable trusting a financial organization to protect their digital currency holdings, when their objective might be to move towards decentralization of their financial assets? In any case, extreme security and protection are always recommended when it comes to finances, but even more so when it comes to cryptocurrency.
TLDR: Mt. Gox was a cryptocurrency exchange that shut down in 2014, with customers losing a total of 850,000 bitcoins. Japan’s Mitsubishi UFJ wants to prevent history from repeating itself and will launch a service to protect investors in the event of hacking or exchanges being compromised.