Mt. Gox Bitcoin Exchange Temporarily Halts US Dollar Payouts

TOKYO, Japan—Mt. Gox, the world’s largest bitcoin exchange, announced yesterday that it is suspending payouts in U.S. dollars for two weeks, due to “rising volumes of deposits and withdrawals from established and upcoming markets interested in bitcoin. This increased volume has made it difficult for our bank to process the transactions smoothly and within a timely manner, which has created unnecessary delays for our global customers.”

Wired UK reports that the issue may actually have to do with fallout from a decision last month by the Department of Home Security to freeze “a Wells Fargo account that Mt. Gox had been using to pay US funds to the Dwolla mobile payment service. When it set up the account, Mt. Gox had failed to properly identify itself as a money transmitting business, a violation of US anti-money-laundering regulations.”

Wired added that, according to some observers, the DHS suspension “has made [Mt. Gox] radioactive to U.S. banks.” One financial services consultant, Larry De Palma, CEO of TDG-Phenix, told the magazine that “regulatory problems have almost certainly caused some banks to shy away from doing business with Mt. Gox,” which then causes “a serious liquidity problem when it comes to trading other currencies into U.S. dollars.”

He addd, "They can't go out and trade or cover trades.”

Nonsense, say other industry observers. Will Voorhees, director of the financial intelligence unit with Silicon Valley Bank, suggested that Mt. Gox is more likely trying to reassure its current bankers jittery following the suspension, and Glucksmann-Smith flat out stated, "This has nothing to do with the U.S. Banks."

That is pretty much the way Mt. Gox is characterizing the interruption it insists is a temporary move. “We are currently making improvements to process withdrawals of United States Dollar (USD) denominations, and as a result are temporarily suspending cash withdrawals of USD for the next two weeks,” the exchange stated yesterday. “Please be reassured that USD deposits and transfers to Mt. Gox will remain unaffected, as will deposits and withdrawals in other currencies, and we will be resuming USD withdrawals once the process is completed.”