Jitters After Bitcoin Exchange Suspends Services

One of the biggest Bitcoin exchanges suspended services on Tuesday, prompting unease in a virtual currency industry already scarred by the collapse last year of Mt. Gox, once its most prominent exchange.

On Tuesday morning, Bitstamp, based in London, posted a message on its website saying it had “temporarily suspended Bitstamp services” and urged its customers not to make deposits to previously issued Bitcoin deposit addresses. The exchange said that some of its virtual wallets were compromised on Sunday and that it had lost roughly 19,000 Bitcoins, worth about $5 million.

In its message, Bitstamp sought to reassure customers and prevent the sort of panic that ensued last February, when news of a major theft at Mt. Gox, based in Tokyo, roiled the Bitcoin world. “Bitstamp customers can rest assured that their Bitcoins held with us prior to temporary suspension of services on January 5th (at 9 a.m. UTC) are completely safe and will be honored in full,” Bitstamp wrote.

“This breach represents a small fraction of Bitstamp’s total Bitcoin reserves, the overwhelming majority of which are held in secure offline cold storage systems,” the exchange added. “We would like to reassure all Bitstamp customers that their balances held prior to our temporary suspension of services will not be affected and will be honored in full.”

On Monday, after Bitstamp issued the first message on its website that it was temporarily suspending services “in an excess of caution,” Nejc Kodric, the exchange’s chief executive, issued an apology on Twitter.

“My sincerest apologies to those who are affected by our service being temporary suspended,” he wrote. Later, he added, “Thank you all for your patience, we are working diligently to restore service and hope to have an E.T.A. later today.”

Bitstamp’s lost Bitcoins are only a tiny percentage of the nearly 14 million Bitcoins in circulation. But the breach provided a stark reminder that the Bitcoin industry is still grappling with its image as a plaything of hackers and ne’er-do-wells intent on exploiting the digital currency and the places where it is traded and stored.

“Bitstamp has become a key part of the Bitcoin ecosystem as one of the most trusted and liquid exchanges,” Gil Luria, an analyst with Wedbush Securities, wrote in an email. “Many market participants have accounts at Bitstamp and rely on its listed prices for their operations. The issues at Bitstamp are hampering activity for the Bitcoin market as it works through these issues.”

“I believe this is yet another sign of the need for regulated, secure, liquid U.S.-based exchanges to create a more robust infrastructure for Bitcoin trading,” he added.

Last February, Mt. Gox filed for bankruptcy protection after going dark some days earlier. At the time, the exchange said it had lost 750,000 of its customers’ Bitcoins and more than 100,000 of its own coins, worth about $500 million at the time.

The event pushed many government agencies to take the regulation of Bitcoin more seriously. Benjamin M. Lawsky, the superintendent of New York State’s Department of Financial Services, for instance, has cited the collapse of Mt. Gox as a driving force behind his office’s proposed virtual currency regulations, which were introduced in July.

Since Mt. Gox closed, the price of Bitcoin has dropped by about half. It is now trading around $270, according to CoinDesk. News that Bitstamp had suspended services did not appear to have significantly affected the currency’s price.

Bitstamp is far from the biggest Bitcoin exchange, representing 6 percent of Bitcoin transactions, according to Bitcoin Charts, which provides data related to the Bitcoin network.

Still, Reddit users on Monday posted a flurry of warnings that Bitstamp was down and speculated that the cause was theft. One user posted that he had foreseen problems at Bitstamp five months ago.

“I have nightmares of Mt. Gox all over again,” the user wrote.