Governments won't be able to help bitcoin users that lost their money after a crash of a virtual currency exchange in Tokyo

Japan calls for international bitcoin regulation

Japan’s vice finance minister Jiro Aichi has said the bitcoin virtual currency should be regulated on an international level to avoid loopholes and debacles such as this week's closure of a major Bitcoin exchange.

Commenting on the situation around the unexpected shutdown of the once world’s biggest Bitcoin exchange – the website Mt.Gox, run by a Tokyo-based company – Aichi said that although the Japanese ministry will investigate the situation, it doesn’t consider Bitcoin a currency.

"As for its legal position, a currency (under Japan's jurisdiction) would be coins or notes issued by the Bank of Japan. At the very least, we can say bitcoin is not a currency," he said.

Similarly, the US Federal Reserve (Fed) chair Janet Yellen said on Thursday to a US Senate committee that the Fed has no jurisdiction over bitcoin but recommended the Congress to consider ways to regulate such virtual currencies.

The Mt. Gox website and its Twitter page went down on Tuesday following a series of cyber attacks, leaving the customers unable to recover their funds. Withdrawals have already been suspended since 7 February.

Bitcoins are created, or "mined", in a process using a network of computers that solve complex mathematical problems as part of a process that verifies and permanently records the details of every bitcoin transaction that is made. At current prices, the bitcoin market is worth about $7bn (£4.2bn).

While proponents of the bitcoin hail its anonymity and lack of ties to traditional banking, regulators have become increasingly interested in the digital currency due to its volatility and usage by criminal elements.

The situation around Mt. Gox confirms these concerns. According to a document leaked on the Internet by blogger Ryan Selkis, more than 744,000 bitcoins – worth around $423m at current rates – were stolen from Mt. Gox because of security gaps in the software used by the company to run transactions.

Mt.Gox’s CEO Mark Karpeles reassured users the company is working hard to resolve the problems. "As there is a lot of speculation regarding Mt. Gox and its future, I would like to use this opportunity to reassure everyone that I am still in Japan, and working very hard with the support of different parties to find a solution to our recent issues."

In the meantime, it was reported that bitcoin owners have turned to rather low-tech solutions to protect their bitcoin savings, printing them out on paper to be stored in a safe place.

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