Future of bitcoin clouded by exchange closure
Mt. Gox, once the world's biggest bitcoin exchange, abruptly stopped trading on Tuesday and its chief executive said the business was at "a turning point", sparking concerns about the future of the unregulated virtual currency. Several other digital currency exchanges and prominent early-stage investors in bitcoin responded with forceful statements in an attempt to reassure investors of both bitcoin's viability and their own security protocols. The website of Mt. Gox suddenly went dark on Tuesday with no explanation, and the company's Tokyo office was empty - the only activity was outside, where a handful of protesters said they had lost money investing in the virtual currency. Hours later, Mt. Gox CEO Mark Karpeles told Compliance Complete in an email: "We should have an official announcement ready soon-ish. We are currently at a turning point for the business. I can't tell much more for now as this also involves other parties." He did not elaborate on the details or give his location. Bitcoin has gained increasing acceptance as a method of payment and has attracted a number of large venture capital investors. At a current price of about US$517, the total bitcoins in circulation are worth approximately US$6.4 billion. Investors deposit their bitcoins in digital wallets at specific exchanges, so the Mt. Gox shutdown is similar to a bank closing its doors - people cannot retrieve their funds. According to bitcoin.org, its most common vulnerability is user error. "Bitcoin wallet files that store the necessary private keys can be accidentally deleted, lost or stolen. This is similar to physical cash stored in a digital form," the FAQ section notes. A document circulating on the Internet purporting to be a crisis plan for Mt. Gox, said more than 744,000 bitcoins were "missing due to malleability-related theft". The document also noted Mt. Gox had US$174 million in liabilities against US$32.75 million in assets. It was not possible to verify the document or the exchange's financial situation. The use of the term "malleability" is, presumably, an indication that transactions might have been relayed on the network with some identification information missing, causing some Bitcoin exchanges and wallets to handle these transactions improperly, resulting in, as Bitcoin.org said on 11 February, "temporary issues with their internal accounting systems". If accurate, that would mean approximately six per cent of the 12.4 million bitcoins minted would be considered missing. A statement on Bitcoin's website said, "In the event of recent news reports and the potential repercussions on Mt. Gox's operations and the market, a decision was taken to close all transactions for the time being in order to protect the site and our users. We will be closely monitoring the situation and will react accordingly." Mt. Gox halted withdrawals earlier this month after it said it detected "unusual activity on its bitcoin wallets and performed investigations during the past weeks." The move pushed bitcoin prices down to their lowest level in nearly two months. Even with the halt on Feb. 7, Mt. Gox still handled more transactions than any other in the past month. Over the past