The Beijing-based Bitcoin exchange Vircurex has frozen most of its Bitcoin withdrawals effective immediately as it claims that thanks to heavy withdrawals it is facing a shortage of the digital currency. The company said that it had large fund withdrawals in the last weeks which led to a complete depletion of its cold wallet balance.
Vircurex declared that thanks to heavy withdrawal it is now facing the option of either closing the site with significant unrecoverable losses for all or to work out a solution that allows the exchange to continue to operate and gradually pay back the losses. Though it is an official reason given by the Bitcoin exchange, some people believe that hackers got into the reserves.
The hacking attempts are not new to Vircurex as the last year at least two such attempts were made on it. Several other Bitcoin exchanges have faced hacking and Bitcoin theft recently and one of them Mt. Gox even collapsed. Vircurex is facing a huge challenge of convincing its customers that it is not hacking but draining out of the reserves.
The decision on the part of Vircurex to freeze all withdrawal with immediate effect will mean that customers won’t be able to withdraw their deposits not just in Bitcoin but also in Litecoin, feathercoin and terracoin. In another message the Bitcoin exchange said that it will create a new balance type called ‘Frozen Funds’ covering all balances in the aforementioned currencies.
Will the Investors Get Their Money Back?
Though the company claimed in clear terms that it won’t shut its operations and gradually pay back the losses, the investors who have been reading the Mt. Gox collapse are extremely skeptical. Those who have tab on the latest events taking place in Bitcoin economy understand the risk that they are facing.
The warning bells for investors were ringing for long but they did not seem to pay attention as Vircurex had a reserve shortfall had been known for quite some time. Earlier the company had claimed that it would be paying its customers with its own consolidated fund; however, now that withdrawal has been frozen, risks have multiplied.
The uncanny feeling among the investors who see similarities between Mt. Gox and Vircurex is understood from the fact that several of them have become restless.
Thousands of Bitcoins are at stake if this Bitcoin exchange collapses. However, the principal risk is for Bitcoin itself as if such Bitcoin exchanges continue to fail investors, governments could ban it outright.
To contact the reporter of this story: Deepak Tiwari at firstname.lastname@example.org