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July 14, 2014, 10:24:35 PM |
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TOKYO—A joint venture between a Chinese and American company plans to launch a new bitcoin exchange in Japan by August, attempting to fill the void left by the collapse of Mt. Gox, once the world's largest trading platform for the crypto-currency.
BitOcean, a Beijing-based bitcoin ATM maker, will team up with Atlas ATS, a New York-based exchange platform provider that has worked for large Wall Street financial institutions.
The new venture—BitOcean Japan—also hopes to purchase the assets of Tokyo-based Mt. Gox, which stopped operating in February and filed for protection from creditors under Japan's bankruptcy code.
While BitOcean Japan hopes to craft its new exchange around the remains of Mt. Gox, one of the founders of the new venture said they would create the Japan-based exchange even if the trustee overseeing the Mt. Gox case doesn't accept BitOcean's bid.
"The collapse of Mt. Gox caused great negative impact to the Bitcoin community. BitOcean wants to make some contribution to the community and creditors," Nan Xiaoning, founder and CEO of BitOcean, told The Wall Street Journal in an email.
BitOcean has 20 employees and was established last year. It currently makes bank-teller machines that can process bitcoins and also plans to expand to Hong Kong and Taiwan to offer exchange and ATM services later this year. The company is investing more than $1 million worth of bitcoins to start up the Japanese exchange, said one of its founders.
Mt. Gox, purchased in 2011 by a French entrepreneur, collapsed after hackers stole 850,000 bitcoins, worth half a billion dollars. Though the company later said it had recovered about one-fourth of the losses, a Japanese bankruptcy court ordered liquidation, and put the process in the hands of a court-appointed trustee.
Many Mt. Gox creditors worry that the trustee will order Mr. Gox's remaining assets be converted to conventional hard currencies, such as the U.S. dollar or the yen. They oppose that because they say it would significantly deflate the value of the bitcoins.
The Fall of Mt. Gox Mt. Gox Pays Parent as Liquidation Continues Q&A With Mt. Gox's Karpelès: What Went Wrong? Japan Virtual Currency Firms to Launch Industry Group One of backers for BitOcean Japan is an American attorney, Daniel Kelman, who is serving a general counsel and co-founder of the joint venture, and is himself a Mt. Gox creditor. He said he has in recent years been working with start-ups in Taiwan, but moved earlier this year to Japan to track the Mt. Gox bankruptcy proceedings.
"We retained lawyers a couple months ago and have been engaging the trustee and trying to influence the proceedings for a speedy distribution of bitcoins to creditors," Mr. Kelman said in an email.
In the BitOcean bid, the new venture would provide 49% of the company's equity to Mt. Gox creditors if the trustee accepts BitOcean's proposal.
"The plan is a win-win for creditors and us," said Mr. Kelman. "Creditors will get their assets returned while we will receive a large customer base."
BitOcean Japan isn't the only bidder for Mt. Gox. Sunlot, a U.S. firm backed by child actor-turned-entrepreneur Brock Pierce, has also made an offer. But Mt. Gox chief executive officer Mark Karpelès told the Journal in a recent interview that he opposes the Sunlot bid because that venture has proposed using some of Mt. Gox's proceeds for their rehabilitation plans, including advertising and auditing.
"I prefer a plan that won't use assets of Mt. Gox, so that creditors will be repaid more," Mr. Karpelès said.
BitOcean says it wouldn't rely on money from Mt. Gox creditors to rebuild the platform, but instead will use its $1 million-equivalent bitcoin investment stake to implement proposed rehabilitation steps, Mr. Kelman said.
In running the new exchange, the BitOcean venture would be structured to address some of the problems that led to Mt. Gox's demise, according to Mr. Kelman.
One problem for Mt. Gox was insufficient security against hackers. Mr. Kelman said BitOcean had better protection because it was joined by Atlas ATS, a U.S.-based exchange platform provider that has built and deployed systems to firms including Deutsche Bank, DBK.XE -0.22% Morgan Stanley, MS -0.85% and J.P. Morgan. JPM +0.43%
"Atlas hopes to be able to link our markets together with BitOcean, so together we could build a global liquid market for digital currency," Chief Executive Officer of Atlas ATS Shawn Sloves told the Journal in an e-mail.
Mt. Gox also had problems maintaining a relationship with a major Japanese bank. Its main bank, Mizuho Bank, had been pressing the exchange to close its account, for fear it could be used for money laundering. Mr. Kelman said the new exchange has already opened three bank accounts in Japan, as one of founders of the new exchange has been living in Japan for a long time and had built relationship of trust with the banks.
"All of the banks are aware of the nature of our business as a bitcoin exchange platform and that has not been a problem," Mr. Kelman said.
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