Is MtGox the Latest to Experience Collateral Damage from Silk Road?

It’s been an interesting few days for digital currencies, and bitcoin. Recent headlines have included questions about the future of

mtgox logoIt’s been an interesting few days for digital currencies, and bitcoin. Last week the Central Bank of Russia issued a warning against virtual currencies, while also stating that companies dealing with the product would be considered suspicious of engaging in criminal activity. The news from Russia was followed by an announcement on Monday on a regional judicial prefecture’s website in the country that it was investigating BTC-e, one of the world’s largest bitcoin exchanges, for infraction of the CBR’s ruling. That was then followed by the very same government entity stating that their website was hacked and the previous day’s investigation was false. (More on Is Russia Investigating Bitcoin Firms?)

While the Russian story targeted the future of BTC-e, another leading exchange by bitcoin trading volumes, MtGox has also become the topic of controversy. Since seeing prices of bitcoins spike higher in March of 2013, MtGox has struggled to deal with demand for its exchange services which has led to long delays of processing dollar-based deposits and withdrawals. Recently, even bitcoin transfers are seeing delays. Despite the company stating that they are working on the problem, with clients having no access to remove their funds whether as fiat or in bitcoins, it has led to questions of what is taking place and a collapse of prices.

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Among the potential reasons as to MtGox’s problems are that they may have also found themselves involved with investigations centered on Silk Road. The case led to the arrest of former VP of the Bitcoin Foundation, Charlie Shrem, as his company BitInstant, was found to have assisted users in participating with Silk Road purchases. On this, MtGox issued a statement that it was delaying withdrawals of BitInstant users. As such, it appears that MtGox is currently also involved with Silk Road investigations but has yet to make a public statement on the matter. Due to their silence, customers at MtGox have become sellers of bitcoins, with spreads between prices at the exchange and other leading venues such as BTC-e and Bitstamp decreading (More on What is Going on at MtGox?)

While this has been taking place, FXOpen announced to Forex Magnates that it had launched a bitcoin exchange in part with BTC-e and it would be providing digital currency liquidity to other brokers and retail clients. The product launch is set to trigger additional momentum for bitcoin CFDs as brokers will have access to a UK regulated entity to open accounts to handle their hedging needs (More on FXOpen Launches Bitcoin Liquidity)

Elsewhere, alt-coins continue to gain traction with the announcements of new listings on various exchanges. Among them, following its success in sending the Jamaican Bobsled Team to the Olympics, dogecoins continue to gain popularity and two new venues to purchase them with dollars have sprung up; AltQuick and Vault of Satoshi. At Vault of Satoshi, after getting listed on the exchange along with primecoin, quarkcoin, feathercoin and namecoin, trading volumes in dollar terms rivaled those of bitcoins (More on The Rise of Dogecoin)

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