Nearly half a billion dollars has gone missing, and nobody knows how. Some say there was outright theft. Others suspect fraud. Many blame lax controls, poor oversight and, above all, a reckless, globe-spanning, Wild West culture — a culture that everyone agrees is ripe for wholesale reform.
I’m not talking about Bitcoin. I’m talking about Citigroup, which disclosed last week that its Mexican banking unit lost $400 million in a contracting swindle involving a shaky oil services company.
To backers of Bitcoin, the Citigroup revelation was a convenient rhetorical weapon: Look, the digital currency’s boosters say, if one of the world’s largest and most tightly regulated financial institutions can also lose a boatload of money, why is everyone getting so bent out of shape about the $470 million collapse of Mt. Gox, once the largest Bitcoin exchange? In the last few years the conventional financial system has lurched from one new fraud to another — from Bernie Madoff to MF Global to the hacking at Target — and yet nobody suggests abandoning dollars as a means of trade. Why aren’t we just as forgiving in our approach to Bitcoin?
It’s a tidy argument. But the comparison between Citigroup’s loss and the fall of Mt. Gox highlights just how unusual and untamable digital currency can be. When scandal engulfs traditional financial institutions like Citigroup, there are investigations and calls for greater oversight — human oversight. Bitcoin, though, was born of mistrust of humans and their institutions. It rests on the belief that financial safety emerges from the integrity of the technology, a computer code that controls a payment system, rather than the trustworthiness of the humans who participate in it.