Much of what's going on reflects lack of liquidity.  Nobody can get USD out of Mt. Gox. So a dollar stuck on Mt. Gox is worth less than a dollar outside it. This generates a spread between Mt. Gox and the other exchanges.

People on Mt. Gox with USD can buy Bitcoins at a premium and try to sell them elsewhere. But that pushes up prices on other exchanges, all of which are rather thinly traded. How much of the recent runup in Bitcoin merely reflects how hard it is to get out of Bitcoins right now?

And the cat ate my homework. Right.

A legit broker would follow that with "We have credited your account at ... bank with $$$ while we resolve our internal problems."

Somehow, all of Mt. Gox's "problems" result in them keeping your money.

That's probably about what it costs to arbitrage Bitcoin/JPY on Mt. Gox, JPY to USD at some bank, transfer to the US, USD to BTC on Bitstamp, BTC to Mt. Gox, and repeat.

Before Mt. Gox defaulted on USD payments, the spread was usually under 3%.

Here's a summary of the Payment Services Act in Japan:

The PSA will allow companies that are not licensed Banks to engage in the business of ‘money remittance transactions’ in Japan provided that: (i) they are registered as ‘fund transfer business operators’ (operators); and (ii) they are able to engage in services to the extent that such transactions fall under the category of a ‘certain small amount of transactions’. Details of the ‘certain small amount’ mentioned in (ii) above will be provided for in the cabinet order. However, in light of discussions at the National Diet of Japan, such amount is expected to be between JPY500,000 and JPY1,000,000 or less. An entity which intends to be an operator will be subject to a registration requirement and certain regulations including the security of its assets and other customer protection measures, supervision and measures against money laundering.

Before this law, only banks could do money transfers. After this law took effect in 2009, almost all the cell phone companies in Japan went into payment services. So sending money from or to a phone is now widespread. All the big money transfer companies like PayPal, Travelex, iRemit, etc. have registered.  As of the end of 2011, there were 20 companies in Japan registered under the Payment Services Act.

Mt. Gox has to register under the Payment Services Act as a "Funds Transfer Business Operator", or become a bank or a "financial instruments firm". They're not either of the last two; here's the list from the Financial Services Agency. I'm trying to find the list for the 20 firms registered under the Payment Services Act. That's done by the Kanto Local Finance Bureau.  Here's an FAQ for funds transfer businesses. I can't find Mt. Gox in any list of the FSA or the Kanto Local Finance Bureau, and they have lists of every value card, money transfer scheme, and financial institution down to Resident Evil game points. (When a game goes bust in Japan, you can get back your unspent game points as yen.)

Even if they registered under the Payment Services Act, they're doing transactions too large for that category of business.

They don't seem to be saying much about what their regulatory problems are.

I suspect that the problem is that the SEC says they have to register as a broker/dealer. Since there's now a court opinion that Bitcoin is a security, it follows that regular securities laws apply. A securities broker is defined as "any person engaged in the business of effecting transactions in securities for the account of others." That's Tradehill. Also, the SEC says "A firm that advertises publicly that it makes a market in securities is obviously a dealer." That's Tradehill.

That means audits, capital requirements, insurance, etc. - all the stuff you have to do to handle other people's money.

This is a tougher requirement than registering as a money transfer firm. It's harder than complying with anti-money laundering laws.  AML is all about disclosure and reporting. Broker/dealer regulation is all about broker/dealers not screwing their customers.

A broker-dealer may not begin business until:

    it has properly filed Form BD, and the SEC has granted its registration;
    it has become a member of an SRO; (a "self-regulation organization, like NASDAQ or FINRA).
    it has become a member of SIPC, the Securities Investor Protection Corporation; (Customers get $500K coverage, the broker pays premiums for this.)
    it complies with all applicable state requirements; and
    its "associated persons" have satisfied applicable qualification requirements. (There's a background check and an exam.)

While all this is a pain for Bitcoin exchanges, it means you get your money back if the "exchange" goes belly-up, which about half of Bitcoin exchanges have done so far. Big win for investors. And no broker/dealer selling to US customers can get away with things like the Mt. Gox withdrawal "hiatus". A broker that gets two or three days behind gets closed down, like Lehman or MF Global. This is a no-bullshit business at the getting-paid level.

Welcome to the real world, Bitcoin. 

Mt. Gox doesn't have to offer the ability to sell BTC for fiat cash.

The problem is that they do offer that ability. Then they keep your money.

That's usually called "theft".

What about the SEC? They're the regulatory agency for brokers and exchanges.

If Bitcoin were a commodity or currency you could trade on major exchanges, we could get rid of all those clowns trying to run Bitcoin exchanges.

That may well be the case.

Many people on here have been taking the position that it's OK if Mt. Gox won't pay out USD, as long as they will pay out Bitcoins.  Of course, there's a 10% or so spread loss when you do that. But beyond that, when does Mt. Gox run out of Bitcoins? There's no reason anybody should put Bitcoins into Mt. Gox at this point; you're on the wrong side of the price spread and can't get money out if you sell. There are about 30,000 Bitcoins for sale on Mt. Gox today, down from previous weeks, with about twice that on the buy side. At some point, those Bitcoins will be gone, or priced out of the market.

That's because everybody who's tried to do a "Bitcoin exchange" has tried to claim they're something they aren't, or aren't something they are. That comes apart when you're moving millions of dollars a week. Or have millions of dollars in customer funds on deposit. "Money transfer" firms don't usually hold customer balances, except briefly while funds are in transit.

Probably the way to go at this is to become a broker/dealer. That requires capital, insurance, audits, and is heavily regulated. For good reason - a broker is well positioned to steal customer funds. But once you're a broker/dealer, you can sign up customers and trade for them and with them in any tradeable commodity, from soybeans to Bitcoins.

Mt. Gox is in trouble because they got big without growing up. 

Because much of that is the same money going back and forth within the same exchange, in transactions between speculators.  Miners need to get money out.

That's not "working". That's a debtor in financial trouble.

None of that delay comes from money-laundering regulations or conspiracy theories involving governments. This is plain, ordinary "they don't have enough money" stalling.

Mt. Gox's customers need an audit of Mt. Gox. Where are all those US dollars right now? 

Is there "liquidity flowing through the exchange?" Or is most of the volume just trading back and forth within Mt. Gox's system?

If some "whale" was able to get money out and exploit that huge spread, the spread would shrink.

They do have something figured out. They want to dump the white-box Bitcoin software product and get into the remittance business, like Western Union.

At the moment their site displays a blank page. It's loading lots of CSS, but there's nothing displayed.

It's not. Arbitrage between Bitcoin exchanges is (was) done by "'bots." Whenever the spread was above the transaction cost, arbitrage 'bots would do the necessary pair of trades on two exchanges. With arbitrage 'bots running and funded, the spread stayed very close to the transaction cost.

This stopped once Mt. Gox defaulted on their USD payments in June. With money stuck in Mt. Gox, arbitrage activities ran out of working capital.

So we have this right now:

▲ mtgoxUSD    124.1466    
▲ bitstampUSD 105.9800
Spread: 17%

So somebody claims to offer a hosted package for running a Bitcoin exchange. That doesn't solve any of the problems on the money side.

You can buy software packages for running a bank. It doesn't make you a bank.

Well, the spread is widening at an alarming rate:

▲ mtgoxUSD    121.5000    
▲ bitstampUSD 104.4300
Spread: 16.8%

If they haven't been stealing customer funds, they should be able to get out of this hole. If they have been stealing customer funds, they're going down.

The real problem is denial of their obligations. Mt. Gox has serious financial obligations to their customers, and they try to sleaze out of them. That's usually associated with scams.

A legit Bitcoin exchange is probably going to have to register as a broker/dealer in some G-20 country, and comply with the regulations for regular brokers. Audits, insurance, capital requirements - it's not just about money laundering. Brokers hold customer assets, and somebody needs to be checking on them to see that they have those assets. Bitfloor and Bitcoinica customers learned that the hard way.

It looked for a while that CoinLab, which was backed by Silicon Valley Bank and some VCs, was going to do that for Mt. Gox. But they had a falling out within two months of signing a deal, and now they're in litigation.

Is there a good online chart of the arbitrage spread?

That's useful information.  See this Forbes article on seizures. US persons to whom Mt. Gox owes money might be able to claim status as an interested party. Also see this DOJ page. It's going to take a lawyer, but if Mt. Gox owes you money, you may have a claim against those seized funds.

Nobody is reporting trouble getting funds into Mt. Gox. Nobody has reported that their SWIFT transfer to Mt. Gox was rejected. Mt. Gox says they are dragging their feet about crediting inbound transfers to customer accounts, but that's purely a Mt. Gox problem.