In a rude jolt to growing virtual currency frenzy in India, bitcoins worth crores of rupees held by some Indians have vanished with collapse of Japan-based Mt Gox, which was the world’s largest bitcoin exchange so far. Having filed for bankruptcy, Mt Gox has admitted to have lost 7.5 lakh bitcoins of its customers and one lakh of its own, which together are estimated to be worth about USD 0.5 billion (over Rs 3,000 crore). Also Read - Bitcoin breaks all records, surges to a new all-time high of around $67,000: Know reason
The exchange was predominantly used by foreigners, including those operating on behalf of clients from India, while some Indians were directly trading there. In its bankruptcy filing, Mt Gox has listed 1.27 lakh creditors, bulk of which are foreigners and just about 1,000 from Japan. Also Read - Bitcoin scammers targeting iPhone users via dating apps: How to identify such scams, tips to stay safeAlso Read - WazirX received 377 legal requests in Apr-Sept 2021: List of actions taken
The debacle can also intensify calls for stricter regulatory checks on bitcoins and other virtual currencies in India and other countries.
Most of the affected Indians refused to identify themselves, fearing probing questions from tax and other authorities in India as they had mostly used untaxed money for purchase of those bitcoins and were looking for easy returns in this so-far unregulated market.
“There could be quite a few India whose bitcoins have got stuck at Mt Gox. We at least know three Indians who have got affected,” said Sathvik Vishwanath, a founding member of Bitcoin Alliance India.
“The Mt Gox shutdown that happened did affect a lot of people. A few Indians we know have their BTC stuck there,” said Sylvester, who is part of a well-known group that organises Bitcoin meetups in Delhi.
While the Mt Gox debacle has hit the fledgling bitcoin community hard, the incident has also exposed the weak security of bitcoins, which exist as small software, against sophisticated hacking attacks. However, some believe blaming the entire incident on unknown hackers could be a way to hide severe accounting or process deficiencies in this case.
“Because of their past delays, it was hard for Indian customers to transfer and receive fiat money from Mt Gox. But this could be a large-scale fraud as well. 8,50,000 coins globally can’t be just stolen without coming under somebody’s notice. It’s next to impossible,” said a bitcoin enthusiast, who works in a Bangalore headquartered IT firm.
The virtual currency’s industry group, the Bitcoin Foundation, has sought to assure Bitcoin users that their funds won?t disappear due to theft or mismanagement. On last count, there were 140 virtual currencies having a combined value of USD 9.3 billion.
Side by side, the US and Japanese prosecutors have started investigations into events leading to the eventual shutdown of Mt Gox. The European Banking Authority is working to set up a task force soon to review options for regulating Bitcoin and such virtual currency derivatives.