More problems for bitcoin. The virtual currency is under attack from computer hackers, even as various governments consider clamping down on it.
Its main trade organisation – the Bitcoin Foundation – says unknown hackers are sending “mutated” lines of computer code into the programme that runs Bitcoin.
“This is a denial-of-service attack,” said the spokeswoman, Jinyoung Lee Englund. “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.”
As a result some transactions have been blocked.
A major Japanese bitcoin exchange, Mt. Gox, and one based in Slovenia, Bitstamp, have halted customer withdrawals.
At one stage this week the always volatile virtual currency’s value fell to its lowest in nearly two months.
The website Coindesk.com had it at around $650 dollar on Wednesday, that is down $300 from the first week in January.
Others have different rates, with dramatic variations from one exchange to another.
Tougher rules, viability worries
“With a fluctuating price driven by speculators and an uncertain legal regime, Bitcoin’s viability as a consumer currency is still up in the air,” said Matthew Rhoades, director of the cyberspace & security programme at the Truman Project and Center for National Policy.
This week Canada became the latest country to say it would toughen rules targeting money laundering and terrorist financing to keep a closer eye on the use of virtual currencies.
In the US, regulators are looking at issuing rules for businesses handling virtual currencies.
Benjamin Lawsky, superintendent of New York’s Department of Financial Services, expects to adopt consumer disclosure rules, capital requirements and a framework for permissible investments with consumer money.
“Our objective is to provide appropriate guard rails to protect consumers and root out money laundering without stifling beneficial innovation,” Lawsky said.
Russian authorities recently issued warnings against using Bitcoin, saying the virtual currency could be used for money laundering or financing terrorism and that treating it as a parallel currency is illegal.
“Systems for anonymous payments and cyber currencies that have gained considerable circulation – including the most well-known, Bitcoin – are money substitutes and cannot be used by individuals or legal entities,” the Russian Prosecutor General’s Office said.
Russia’s central bank also said on Jan. 27 that Bitcoin trade was highly speculative and that the unit carried a big risk of losing value.
“Citizens and legal entities risk being drawn – even unintentionally – into illegal activity, including laundering of money obtained through crime, as well as financing terrorism,” it warned.
A high-profile promoter of the digital currency was arrested at the end of January. Charlie Shrem has been charged with conspiracy to commit money laundering and operating a money changing business without a licence.
Federal prosecutors in New York said Shrem and and Robert Faiella, another bitcoin exchange operator, had been attempting to sell one million dollars in the digital currency to users of the underground black market website Silk Road, which was shut down by authorities in September.