Bitcoin prices on rollercoaster as negative news highlights risks

Published in: Latest Intelligence It’s been a tumultuous start to the year for bitcoin, with a major hacking attack, possible fraud, a high-profile arrest, and concerns over increased regulation all serving to send the value of the virtual currency into a tail spin on some exchanges.
The recent news flow has highlighted the potential pitfalls of the use of the currency, which has been touted as an ideal match for the iGaming industry.
Major bitcoin exchanges are just getting back on their feet after a hacking attack that forced them to suspend all transactions.
The Bitcoin Foundation call it a “denial of service" attack. “Whoever is doing this is not stealing coins, but is succeeding in preventing some transactions from confirming. It’s important to note that DoS attacks do not affect people’s bitcoin wallets or funds,” it said.
The bug may result in users seeing their bitcoins “tied up” in unconfirmed transactions, it said, adding only users who make multiple transactions in a short period of time will be affected.
Slovenia-based Bitstamp, among the largest bitcoin exchanges, said on its website that developers had come up with a solution to thwart the cyber attacks against its platform and transactions are scheduled to resume.
“Unforeseen incidents like this DoS attack against an edge case in the Bitcoin protocol are to be expected with such a young technology. The core protocol remains sound and the world has seen how these incidents are addressed by the Bitcoin community. Every challenge that is successfully overcome is a milestone that allows the world to grow their confidence in Bitcoin,” Bitstamp says.
Meanwhile, MtGox, the biggest of the bitcoin exchanges was still struggling to resume operations on Thursday as it had initially promised.
Earlier in the week, the company claimed it had a new system in place that would allow bitcoin transactions to resume but at a moderated pace, with new daily/
monthly limits in place to prevent any problems and to take into account current market conditions.
However, Thursday the company was forced to issue a further apology. The company said security problems had forced it to relocate offices and that had further delayed resumption of service.
While both of the above exchanges said no clients had lost money in the attack, the anonymous drug marketplace Silk Road 2, appears to have been less fortunate, with the site claiming that the attack had cleared out all of its customers’ bitcoins.
According to unconfirmed reports, an administrator for the site said hackers had manipulated computer code enabling them to withdraw $2.7 million in bitcoins.
The barrage of negative news sent the currency reeling, though price discrepancies on various exchanges were enormous, again highlighting the risks involved with the young and unregulated currency.
On MtGox, the price plummeted to as low as $220.29 on Monday before recovering to $390 on the company’s statement a fix was at hand.
Still, the price remains a long way short of the $642 rate quoted by Coindesk, which averages prices across leading global exchanges excluding Mt Gox.
Another setback to the reputation of the digital currency, which is viewed warily by regulators amid fears its anonymous nature could make it a channel for illegal activities, was the arrest of Charlie Shrem, the CEO of exchange BitInstant and one of the biggest advocates for the currency.
U.S. government agents charged Shrem with laundering money for customers of Silk Road. They claim he helped Robert Faiella, who he hadn’t met in person, sell more than $1 million worth of bitcoins to Silk Road customers.
Meanwhile regulators continue to send out mixed messages on their approach to virtual currency.
New York state’s financial services superintendent Benjamin Lawsky has detailed his plans to regulate bitcoins sometime this year, saying he plans to issue licenses to companies dealing with bitcoins.
Lawsky said Bitcoin exchanges should have to warn their customers virtual transactions are irreversible, that bitcoin values are volatile and they should carefully guard their digital wallet keys. The message is to create a disclosure regime similar to that in other areas of the financial world, that may even include a “Know Your Customer,” rule.
The state of New York might also impose rules on Bitcoin-related money businesses similar to those that govern banks, although it's unclear how that would work.
Canada, which initially appeared to tolerate the advent of virtual currencies, has also now indicated that it plans a crackdown to prevent money laundering and the financing of terrorist activities.
The government said in the federal budget that it would update legislation, but gave few details. Proposed measures could allow the federal government to track any transfers worth $10,000 or more, which is already the case with hard currencies.
However, in Thailand there appears to have been a thaw. BitLegal, a website that tracks regulatory developments with virtual currency, reports that Bitcoin Co. Ltd. claims to have received a letter from the Bank of Thailand saying its operations don’t fall under Ministry of Finance regulation unless foreign currencies are also offered for exchange.
Thailand’s largest exchange has taken the letter as a green light to resume operations that were shut down last year. However, BitLegal points out that the letter is essentially the interpretation of the central bank and gives no assurances the Ministry of Finance won’t change the regulatory landscape.
 

Bet365 awaits AUSTRAC investigation, results up for 23/24 financial year
_2025-01-07Paradise Ent. and Tangiamo sign global distribution agreements
_2025-01-07Most content removal requests target online gambling: Malaysia comms authority
_2025-01-07Clark International Airport welcomes 2.4M passengers in 2024, mostly international
_2025-01-07Nearly 60 workers fight their way out of sanctioned Cambodian casino complex
_2025-01-07Record $17.7 million Mark Six jackpot in Hong Kong split by two winners
_2025-01-07

Open in new window
View settings