The risks to banks of handling bitcoin-related business has moved centre-stage as Japan's Mizuho gets caught in the cross-hairs of the MT Gox collapse.
As the banker to wound-up bitcoin exchange MT Gox, Mizuho has been named in two of the numerous lawsuits being brought against the defunct operation in the US and Canada.
The US suit, brought by Illinois resident Gregory Greene, accuses Mizuho of aiding and abetting a fraud by holding fiat currency on account for Mt Gox. He accuses Mizuho of failing to segregate customer funds from MT Gox accounts and of continuing to provide banking services to the troubled firm even as it was evidently heading for collapse.
The Canadian filing names MT Gox, its owners Mark Karpeles and Jed McCaleb, and Mizuho as co-defendants in a $500 million lawsuit.
Banks have been wary of handling Bitcoin-related businesses in the absence of a proper legal and regulatory framework for the crypto-currency. Even if the suits against Mizuhos prove baseless, the reputational damage facing the Japanese bank and the legal costs of defending its actions in the case are likely to scare yet more banks away from the virtual currency world.