By Emily Flitter and Douwe Miedema
WASHINGTON/NEW YORK Feb 11 Bitcoin is being hit
by attacks from unknown computer hackers who are sending
"mutated" lines of code into the program that runs the virtual
currency, a spokeswoman from its main trade organization said in
a statement on Tuesday.
The attacks are responsible for problems experienced by two
bitcoin exchanges that caused them to temporarily halt
withdrawals by customers who stored bitcoins in digital wallets
provided by the exchanges, the Bitcoin Foundation said in a
"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."
Englund said a team of core software developers who focus on
bitcoin were working to fix the problem, but until it was solved
some users would not be able to do anything with their bitcoins,
and the affected bitcoins would appear to be "tied up" in
"Only users who make multiple transactions in a short period
of time will be affected," she said.
On Tuesday, Slovenia-based Bitstamp became the second major
bitcoin exchange to halt customer withdrawals in the past
several days, citing "inconsistent results", and blaming a
That was a day after Mt. Gox, the best-known digital
marketplace operator, said a halt on withdrawals would continue
indefinitely. Traders reacted to the halt by sending the value
of bitcoin to its lowest in nearly two months.
The price of bitcoin, which has gained wider acceptance in
recent months, varied dramatically from one exchange to another.
On Tuesday, it was quoted at $645 per coin on Bitstamp's
exchange, down 6 percent on the day.
NEW MOVES BY REGULATORS
Also on Tuesday, Canada said it will toughen rules targeting
money laundering and terrorist financing to keep a closer eye on
the use of virtual currencies.
Meanwhile, in Washington, 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 in a speech at the New
America Foundation in Washington.
Lawsky said last month that his agency plans to issue rules
for businesses handling virtual currencies, including a
"BitLicense", which could make New York the first U.S. state to
regulate virtual currencies such as bitcoins.
Bitcoin proponents like the fact that it and a host of other
currencies generated by computer programs are not backed by a
government or central bank, and that their value fluctuates only
according to demand.
"The really tricky question for regulators is how we
structure those types of rules in light of the fact that the
funds these firms hold are not denominated in dollars or other
forms of traditional fiat currencies," Lawsky said.
Lawsky expected to release the regulations in the spring or
the summer of this year, and said the agency would seek public
comment once it had published the plan in a so-called notice for
His agency is still wrestling with the question of whether
to ban or restrict the use of "tumblers", which obscure the
record and source of virtual currencies. Tumblers are a concern
to law enforcement, but they might also have legitimate uses.
He said most virtual currencies have public ledgers which,
when combined with know-your-customer guidelines, could serve as
anti-money laundering controls.
The remarks follow two days of hearings in New York on the
potential regulation of virtual currencies. Witnesses at the
late January hearings included state and federal prosecutors, as
well as industry participants such as the investor twins Cameron
and Tyler Winklevoss.