The arrest of Mark Karpels former CEO of failed Bitcoin Exchange Mt Gox could be a watershed event for Bitcoin. While the attractiveness of Bitcoin is the fact that there is no one governing body controlling the cryptocurrency it also means has made investors and traders weary since scams like Mt Gox might still be out there. The arrest marks the first one regarding any bitcoin-related business and demonstrates that those that are offering products like Bitcoin still need to follow local laws.
The arrest was not specifically related to the bankruptcy of Mt. Gox but rather to the fact that Karpels had inflated his account by over $1 million. Karpels could be facing up to 5 years in Prison with some fines as well. It is estimated the Mt Gox had lost close to $400 million of investor money. Supporters of Bitcoin are hoping that this keeps any nefarious characters from offering Bitcoin products. This probably not likely to be the case but at least it does let people know that there are consequences to committing fraud even with an unregulated product.
Going forward Bitcoin may need to make some adjustments in the area of privacy in order to offer a level of protection and some level of AML. Some states in the United States have already taken steps to begin regulating Bitcoin. Both New York and California are drafting legislation that would hold a business that holds Bitcoin and virtual currency to similar standards as banks. While there are bound to protest this will, in the end, ensure consumer protection and keep Bitcoin from becoming a tool of fraudsters.
Bitcoin took a very big image hit last year when Mt Gox happened. This may be the first step in many for the rehabilitation of the CryptoCurrency. Bitcoin will have many hurdles ahead to break into the mainstream of financial services products.