U.S. and Japanese authorities move on Bitcoin
News on 4 Mar 2014
News on 4 Mar 2014
With a reported 50 to 60 percent of Bitcoin transactions involving online gambling, it is hardly surprising that the industry is keeping a close eye on developments in the highly volatile cyber-currency, which has come under DDoS attack on several sites recently, contributing to the bankruptcy of leading Bitcoin exchange Mt.Gox in Japan (see previous reports).
Whilst government officials around the world have so far not acted on the remarkable rise of Bitcoin in both volume and value, it now appears that they are taking a more active interest in the virtual currency.
Last week the Reuters news agency reported that Manhattan U.S. Attorney Preet Bharara has sent subpoenas to Mt. Gox, other Bitcoin exchanges, and businesses that deal in Bitcoin to seek information on how they handled recent Distributed Denial of Services (DDoS) attacks.
At least three exchanges were forced to halt withdrawals of Bitcoins early February, including Mt. Gox, which was the largest at the time, but failed to resume service. That left customers unable to recover their funds, driving the value of the currency down.
Japanese authorities are also reacting, with Finance Minister Taro Aso saying Tuesday that the government is still trying to establish what caused the collapse of the Tokyo-based Mt. Gox and whether crime is involved.
“We still have not had a clear grasp of the situation,” Aso said in response to a reporter’s question after a cabinet meeting. “(We) don’t know if it was a crime or just a bankruptcy.”
Mt. Gox filed for bankruptcy protection in Japan last Friday, saying it may have lost nearly half a billion dollars’ worth of the virtual currency due to hacking into its faulty computer system.
Reuters says February was a tough month for Bitcoin investors, with cyber-attacks on several exchanges, and a sharp fall in Bitcoin’s value. The losses were most dramatic on Mt. Gox, where the value of a Bitcoin fell to about $135 from $828.99 before February 7.
Some analysts have claimed that Mt. Gox’s troubles may go deeper than cyber-attacks. Mike Hearn, a Bitcoin developer in Zurich, Switzerland, told Reuters:
“Mt Gox has been broken and it was obvious there was something really bad going on there for nearly a year. They were processing withdrawals very slowly and generally being very opaque about what was going on there.”
Reuters reports that a document circulating on the Internet and purporting to be a crisis plan for Mt. Gox, said more than 744,000 Bitcoins were “missing due to malleability-related theft,” and noted that the Bitcoin exchange had $174 million in liabilities against $32.75 million in assets.
It was not possible to verify the document, but if true, this would imply that approximately 6 percent of the 12.4 million Bitcoins minted could be considered missing, according to Reuters.
With government investigations now clearly commencing, developers are working on fixes to strengthen Bitcoin’s software against cyber-attacks, says Gregory Maxwell, one of the Bitcoin software’s core developers.
