6 ms·

Hate to quote myself, but see the P.S. here: http://news.ycombinator.com/item?id=5568610 http://news.ycombinator.com/item?id=5568610 If I were a gambling man,

by patio11 13y ago

Hate to quote myself, but see the P.S. here: http://news.ycombinator.com/item?id=5568610 http://news.ycombinator.com/item?id=5568610 If I were a gambling man, I'd say this is quite likely to be shoe #1.

drcode 13y ago
Unfortunately true. I'd hate to tell everyone with money in mtgox that it is time for a bank run, but...
- pdog 13y ago
  Luckily, everyone with deposits in Mt.Gox can convert them to bitcoins and send them to some other address. This is one of the benefits of Bitcoin.
  - simias 13y ago
    If mtgox crashes bitcoin crashes, at least temporarily. You'll end up with your bitcoins safe, but they won't be worth $100+ anymore (if ever again).
  - wcoenen 13y ago
    Unfortunately, nobody will be willing to sell bitcoins for USD on mtgox if they can't ever get their USD out.
  - drcode 13y ago
    Right, but my guess is people who have dollar holdings on mtgox aren't going to find it as easy now to sell them in order to do such a transfer.
  - drcode 13y ago
    This assumes they haven't already spent some of their depositors' bitcoin and can run out. (Not claiming they have done this, just pointing out this scenario is possible)
  - dragonwriter 13y ago
    > Luckily, everyone with deposits in Mt.Gox can convert them to bitcoins and send them to some other address. If you have US dollars on Mt.Gox, and no one can take US dollars out of Mt.Gox now and there is very low confidence that this will change in the future, its going to be very hard to find anyone give up any other currency or virtual currency for US dollars -- whether you want bitcoins, yen, slips of latinum, or triganic pu, no one is going to give you them for dollars on Mt.Gox if dollars deposited on Mt.Gox are trapped.
    - jaggederest 13y ago
      Sure they will, coinbase will quite happily turn them back into USD for you.
      - dragonwriter 13y ago
        If you have bitcoins on Mt.Gox, sure, you can get USD for them elsewhere. The issue I was raising was that if you have USD on Mt.Gox and people don't think USD will be able to be extracted from Mt.Gox, you will have trouble converting your USD to bitcoin to get it off Mt.Gox, because people who have bitcoin on Mt.Gox will be reluctant to convert it to USD on Mt.Gox.
        jaggederest 13y ago
        That's true, but I'm unclear why you'd store USD for any length of time on mtgox anyway.
        pmorici 13y ago
        It takes a long time to transfer money into MtGox and with the wild price fluctuations it might be prudent to wait for a better price instead of buying at the current market price the second the transfer clears.
        dragonwriter 13y ago
        > That's true, but I'm unclear why you'd store USD for any length of time on mtgox anyway. The same reason you'd keep any currency in an account tied to a particular marketplace: liquidity that allows you to trade without the delay of getting money into the marketplace from somewhere else.
  - zwtaylor 13y ago
    That seems to be what's happening at the moment. I initially assumed this announcement would cause a panic sell-off, instead it seems as if a lot of users are now converting their USD back into BTC in light of the hiatus. The exchange rate has ticked up pretty steadily as a result.
    - gwern 13y ago
      If it was just a MtGox only issue, then bitcoins on MtGox ought to be at a premium compared to the other exchanges. But if you look at http://bitcoincharts.com/markets/ http://bitcoincharts.com/markets/ it seems like MtGox is perfectly in line with the other markets - within half a dollar of Bitstamp and actually cheaper than BitBox etc.
      - andrewla 13y ago
        Check again -- look at http://bitcoincharts.com/markets/currency/USD.html http://bitcoincharts.com/markets/currency/USD.html. There's a significant premium on MtGox. At the time that I'm writing this, the values are mtgoxUSD: 112.99 bitstampUSD: 107 btceUSD: 106.87 cbxUSD: 106.12 vcxUSD: 105 bitoxUSD: 95
        gwern 13y ago
        I get a different version checking now - MtGox isn't even the most demanding of Bitcoin: icbitUSD 100 bitstampUSD 103 btceUSD 106 cbxUSD Camp 107 mtgoxUSD 109 rockUSD 109 bitboxUSD 118 It's tied with rock, and as I said, below BitBox. Looks like Bitstamp has diverged more, though.
      - zwtaylor 13y ago
        This is true, but Mt. Gox historically has the lowest exchange rate as they have far more liquidity than other exchanges. Gox is also the primary indicator against which other markets rise or fall, today is no exception. In an unrelated note, big fan of your site.
jwr 13y ago
I agree. I'd read this statement as: none of our partner banks will do USD withdrawals for us anymore. We think we might be able to find a new bank within two weeks.
- wiredfool 13y ago
  Yep. I'd bet real money on that being the root cause. I'm not so sure about the new bank thing though.
ig1 13y ago
I don't know about US law, but in Europe if you're a financial institution and you suspect a customer transaction is involved in money laundering or a similar it's a criminal offence to inform the customer without first clearing it with the relevant legal authorities. If there is some kind of investigation going on MtGox might be completely unaware of it, saying "there's a backlog" is a pretty common way to provide cover while such an investigation is on-going. One of the reasons you get fully licensed as a financial institution by regulators is that you get some level of legal protection/ring-fencing from the activities of your own customers. (IANAL but I used to work on real-world forex trading desk in a previous life, hence had to undergo the mandatory FSA training)
- gadders 13y ago
  In the UK, you can never inform the customer - that is the offence of "tipping off".
  - ig1 13y ago
    IIRC You can with the consent of the FS(C)A
wmf 13y ago
The weird thing is that MtGox made a deal to (effectively) sell themselves to Coinlab which would have either fixed these problems or at least made them not Gox's problems. But then they went back on the deal.
mathattack 13y ago
I wonder about the economics. Could this just be an issue of them deciding to close down altogether? I don't know why, but this read to me more like a run on a bank, rather than a compliance issue. What did people do in the Great Depression? Bank holidays....
- pakitan 13y ago
  Unlikely. MtGox is not a bank. They charge commission on every trade and make pretty good money. They were running just fine 1 year ago when the volume was few times less so it's unlikely they are having financial problems now.
downandout 13y ago
We probably saw the beginning of this problem a month ago - https://news.ycombinator.com/item?id=5707936 https://news.ycombinator.com/item?id=5707936 . I can't imagine that the two are not related. Also from the https://support.mtgox.com/entries/21649594-Withdrawals-and-Deposits https://support.mtgox.com/entries/21649594-Withdrawals-and-D... : OKpay has made the decision not to work with any Bitcoin exchanges as of May 29, 2013. Dwolla has closed our account as of May 15, 2013. All of the recent closures don't exactly instill confidence. Still, it might be possible to form or partner with a Japanese entity and receive domestic transfers from them.
ChuckMcM 13y ago
Hardly shoe #1, more like #8 or #9. With the take down of Liberty Reserve, the killing off of a number of exchanges and interfaces to exchanges, its pretty clear the US Government at least has decided to focus for a time on the financial infrastructure which underpins a big chunk of Internet criminal activity. The privacy advocates are getting somewhat caught in the crossfire. As a company that works with internet advertisers, we see the shadowy parts of the web shimmering there on the periphery, lots of people are trying to scam Google out of some of its advertising revenue, it is a full time job to identify and quash fraudulent traffic here at Blekko, I know from experience that there are many folks at Google that do nothing but that. But more than that, it says that these activities have reached the nation-state level of attention. Which puts the global losses in the 150 to 200 billion dollars annually. The effect of that is what Patrick experienced where regulators start effectively 'regex' banning types of activities that are associated with these activities. It's a cold compress on an arterial bleed, not a solution but something to stem the blood loss while other measures are being taken. It is really all about cash though. When crime doesn't pay, people don't do it. So focusing on making it hard to get paid is the strategy it seems to work on Internet criminal activity. If I had to bet I'd say that someone in the Treasury department has a goal of (ideally) making it impossible to use BitCoin to facilitate criminal activity, through a series of regulations requiring transaction reporting and verification, killing off exchanges that don't do that, and pressuring partners to do the same.
- downandout 13y ago
  It doesn't really make it that hard to cash in. See http://localbitcoins.com http://localbitcoins.com . You'll just get a slightly lower exchange rate. If they thought they didn't want people receiving traceable wire transfers from Mt. Gox, imagine how little they will like the alternative they are pushing people to - in-person cash trades. >The effect of that is what Patrick experienced where regulators start effectively 'regex' banning types of activities that are associated with these activities. What Patrick experienced is a symptom of the rules surrounding ACH transactions - namely that they can be charged back up to 6 months later (1 year in some cases). That makes banks squeamish about accounts receiving large numbers of them. I don't think ACH transactions in general are "associated" with criminal activity - most paychecks are delivered this way.
pbreit 13y ago
Did they shut you down for risk or for using a personal account for business?

by patio11 13y ago

drcode 13y ago

Unfortunately true. I'd hate to tell everyone with money in mtgox that it is time for a bank run, but...

pdog 13y ago
Luckily, everyone with deposits in Mt.Gox can convert them to bitcoins and send them to some other address. This is one of the benefits of Bitcoin.
- simias 13y ago
  If mtgox crashes bitcoin crashes, at least temporarily. You'll end up with your bitcoins safe, but they won't be worth $100+ anymore (if ever again).
- wcoenen 13y ago
  Unfortunately, nobody will be willing to sell bitcoins for USD on mtgox if they can't ever get their USD out.
- drcode 13y ago
  Right, but my guess is people who have dollar holdings on mtgox aren't going to find it as easy now to sell them in order to do such a transfer.
- drcode 13y ago
  This assumes they haven't already spent some of their depositors' bitcoin and can run out. (Not claiming they have done this, just pointing out this scenario is possible)
- dragonwriter 13y ago
  > Luckily, everyone with deposits in Mt.Gox can convert them to bitcoins and send them to some other address. If you have US dollars on Mt.Gox, and no one can take US dollars out of Mt.Gox now and there is very low confidence that this will change in the future, its going to be very hard to find anyone give up any other currency or virtual currency for US dollars -- whether you want bitcoins, yen, slips of latinum, or triganic pu, no one is going to give you them for dollars on Mt.Gox if dollars deposited on Mt.Gox are trapped.
  - jaggederest 13y ago
    Sure they will, coinbase will quite happily turn them back into USD for you.
    - dragonwriter 13y ago
      If you have bitcoins on Mt.Gox, sure, you can get USD for them elsewhere. The issue I was raising was that if you have USD on Mt.Gox and people don't think USD will be able to be extracted from Mt.Gox, you will have trouble converting your USD to bitcoin to get it off Mt.Gox, because people who have bitcoin on Mt.Gox will be reluctant to convert it to USD on Mt.Gox.
      - jaggederest 13y ago
        That's true, but I'm unclear why you'd store USD for any length of time on mtgox anyway.
        pmorici 13y ago
        It takes a long time to transfer money into MtGox and with the wild price fluctuations it might be prudent to wait for a better price instead of buying at the current market price the second the transfer clears.
        dragonwriter 13y ago
        > That's true, but I'm unclear why you'd store USD for any length of time on mtgox anyway. The same reason you'd keep any currency in an account tied to a particular marketplace: liquidity that allows you to trade without the delay of getting money into the marketplace from somewhere else.
- zwtaylor 13y ago
  That seems to be what's happening at the moment. I initially assumed this announcement would cause a panic sell-off, instead it seems as if a lot of users are now converting their USD back into BTC in light of the hiatus. The exchange rate has ticked up pretty steadily as a result.
  - gwern 13y ago
    If it was just a MtGox only issue, then bitcoins on MtGox ought to be at a premium compared to the other exchanges. But if you look at http://bitcoincharts.com/markets/ http://bitcoincharts.com/markets/ it seems like MtGox is perfectly in line with the other markets - within half a dollar of Bitstamp and actually cheaper than BitBox etc.
    - andrewla 13y ago
      Check again -- look at http://bitcoincharts.com/markets/currency/USD.html http://bitcoincharts.com/markets/currency/USD.html. There's a significant premium on MtGox. At the time that I'm writing this, the values are mtgoxUSD: 112.99 bitstampUSD: 107 btceUSD: 106.87 cbxUSD: 106.12 vcxUSD: 105 bitoxUSD: 95
      - gwern 13y ago
        I get a different version checking now - MtGox isn't even the most demanding of Bitcoin: icbitUSD 100 bitstampUSD 103 btceUSD 106 cbxUSD Camp 107 mtgoxUSD 109 rockUSD 109 bitboxUSD 118 It's tied with rock, and as I said, below BitBox. Looks like Bitstamp has diverged more, though.
    - zwtaylor 13y ago
      This is true, but Mt. Gox historically has the lowest exchange rate as they have far more liquidity than other exchanges. Gox is also the primary indicator against which other markets rise or fall, today is no exception. In an unrelated note, big fan of your site.

jwr 13y ago

I agree. I'd read this statement as: none of our partner banks will do USD withdrawals for us anymore. We think we might be able to find a new bank within two weeks.

wiredfool 13y ago
Yep. I'd bet real money on that being the root cause. I'm not so sure about the new bank thing though.

ig1 13y ago

I don't know about US law, but in Europe if you're a financial institution and you suspect a customer transaction is involved in money laundering or a similar it's a criminal offence to inform the customer without first clearing it with the relevant legal authorities. If there is some kind of investigation going on MtGox might be completely unaware of it, saying "there's a backlog" is a pretty common way to provide cover while such an investigation is on-going. One of the reasons you get fully licensed as a financial institution by regulators is that you get some level of legal protection/ring-fencing from the activities of your own customers. (IANAL but I used to work on real-world forex trading desk in a previous life, hence had to undergo the mandatory FSA training)

gadders 13y ago
In the UK, you can never inform the customer - that is the offence of "tipping off".
- ig1 13y ago
  IIRC You can with the consent of the FS(C)A

wmf 13y ago

The weird thing is that MtGox made a deal to (effectively) sell themselves to Coinlab which would have either fixed these problems or at least made them not Gox's problems. But then they went back on the deal.

mathattack 13y ago

I wonder about the economics. Could this just be an issue of them deciding to close down altogether? I don't know why, but this read to me more like a run on a bank, rather than a compliance issue. What did people do in the Great Depression? Bank holidays....

pakitan 13y ago
Unlikely. MtGox is not a bank. They charge commission on every trade and make pretty good money. They were running just fine 1 year ago when the volume was few times less so it's unlikely they are having financial problems now.

downandout 13y ago

We probably saw the beginning of this problem a month ago - https://news.ycombinator.com/item?id=5707936 https://news.ycombinator.com/item?id=5707936 . I can't imagine that the two are not related. Also from the https://support.mtgox.com/entries/21649594-Withdrawals-and-Deposits https://support.mtgox.com/entries/21649594-Withdrawals-and-D... : OKpay has made the decision not to work with any Bitcoin exchanges as of May 29, 2013. Dwolla has closed our account as of May 15, 2013. All of the recent closures don't exactly instill confidence. Still, it might be possible to form or partner with a Japanese entity and receive domestic transfers from them.

ChuckMcM 13y ago

Hardly shoe #1, more like #8 or #9. With the take down of Liberty Reserve, the killing off of a number of exchanges and interfaces to exchanges, its pretty clear the US Government at least has decided to focus for a time on the financial infrastructure which underpins a big chunk of Internet criminal activity. The privacy advocates are getting somewhat caught in the crossfire. As a company that works with internet advertisers, we see the shadowy parts of the web shimmering there on the periphery, lots of people are trying to scam Google out of some of its advertising revenue, it is a full time job to identify and quash fraudulent traffic here at Blekko, I know from experience that there are many folks at Google that do nothing but that. But more than that, it says that these activities have reached the nation-state level of attention. Which puts the global losses in the 150 to 200 billion dollars annually. The effect of that is what Patrick experienced where regulators start effectively 'regex' banning types of activities that are associated with these activities. It's a cold compress on an arterial bleed, not a solution but something to stem the blood loss while other measures are being taken. It is really all about cash though. When crime doesn't pay, people don't do it. So focusing on making it hard to get paid is the strategy it seems to work on Internet criminal activity. If I had to bet I'd say that someone in the Treasury department has a goal of (ideally) making it impossible to use BitCoin to facilitate criminal activity, through a series of regulations requiring transaction reporting and verification, killing off exchanges that don't do that, and pressuring partners to do the same.

downandout 13y ago
It doesn't really make it that hard to cash in. See http://localbitcoins.com http://localbitcoins.com . You'll just get a slightly lower exchange rate. If they thought they didn't want people receiving traceable wire transfers from Mt. Gox, imagine how little they will like the alternative they are pushing people to - in-person cash trades. >The effect of that is what Patrick experienced where regulators start effectively 'regex' banning types of activities that are associated with these activities. What Patrick experienced is a symptom of the rules surrounding ACH transactions - namely that they can be charged back up to 6 months later (1 year in some cases). That makes banks squeamish about accounts receiving large numbers of them. I don't think ACH transactions in general are "associated" with criminal activity - most paychecks are delivered this way.

pbreit 13y ago

Did they shut you down for risk or for using a personal account for business?