Bitcoin Exchange Crisis Causes ‘Existential’ Concerns for Cryptocurrency

Feb. 27, 2014

Bitcoin Exchange Crisis Causes ‘Existential’ Concerns for Cryptocurrency A leaked document, purportedly from MtGox, the world’s largest Bitcoin exchange, has resulted in the shuttering of MtGox’s site, uncertainty from account holders who cannot currently withdraw their funds and near panic in the Bitcoin world at large. The document, revealed by a prominent Bitcoin blogger and verified as authentic by several published reports, claims hundreds of millions of dollars’ worth of its customers’ Bitcoins are missing.

The cryptocurrency had been enjoying a run of relatively good publicity lately, including several prominent online merchants like announcing their intent to accept Bitcoin on their sites. The current crisis, however, shines a light on what regulators and critics have been calling Bitcoin’s biggest vulnerability: lack of transparency. One pundit has even called MtGox’s current predicament “an existential crisis” for Bitcoin at large.

The leaked document said the exchange has lost 744,408 Bitcoins due to theft.

On Tuesday, MtGox’s Website and Twitter account were abruptly taken down and left temporarily blank. The company posted a message at its site yesterday that read, in part, “In light of recent news reports and the potential repercussions on MtGox’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.”

A further message was posted yesterday from MtGox CEO Mark Karpeles (who resigned his seat on the board of The Bitcoin Foundation):

“As there is a lot of speculation regarding MtGox and its future, I would like to use this opportunity to reassure everyone that I am still in Japan, and working very hard with the support of different parties to find a solution to our recent issues.”

The price of a Bitcoin, which has been incredibly volatile in the past year, anyway, went on a wild ride that took it near $100 (down from a high only a few weeks ago of more than $1,200) before settling at around $500.

In an attempt to regain stability, several important executives at Bitcoin-related companies, including Jeremy Allaire of Circle, Fred Ehrsam and Brian Armstrong of Coinbase and Cary Nichols of Blockchain authored an open letter distancing the rest of the industry from MtGox .

The letter calls MtGox’s actions “a tragic violation of the trust of users” and tries to assure skittish consumers that “strong Bitcoin companies, led by highly competent teams and backed by credible investors, will continue to thrive, and to fulfill the promise that Bitcoin offers as the future of payment in the Internet age.”