Hack attack pushes Bitcoin to the brink

Bitcoin, an online currency beloved of libertarians and technophiles, which had been threatening to break into the mainstream, was facing the worst crisis of its two-year existence last night after hackers brought down its biggest exchange.

The attack, an apparent attempt to steal the contents of users' online accounts and convert them into real money, is the latest in a string of disasters to hit Bitcoin in the past few weeks, raising questions over whether the currency has a future.

In the UK, supporters of Bitcoin made an urgent appeal to the Financial Services Authority to regulate the largest London-based exchange, so as to reassure people that using Bitcoin is safe. "Unregulated businesses don't usual cry out for regulation," said Donald Norman, co-founder of the exchange Britcoin. "But because we are unusual, and because we are dealing with people's money, and because of all the scary stories around Bitcoin, we would like nothing more than to have a government authority looking into our accounts – especially now."

The exact nature of the attack on the Japan-based Mt Gox exchange was not immediately clear. Mark Karpeles, who runs Mt Gox, said attackers gained access to a computer that had details of all account users and their encrypted passwords. As of last night, the company was still running "intrusion tests", as rumours swirled about how much money might have been stolen in the heist.

Bitcoin was invented as an open source project in 2009 as a decentralised alternative to real world currencies. By setting an absolute limit on the amount of Bitcoins that could be created, its adherents believe, the currency could one day become a "gold standard" against which government-operated currencies could be valued. The currency could also become an easy way to conduct commerce online, away from expensive taxation, regulation and bank fees.

As of 2pm, New York-time on Sunday, the number of Bitcoins in existence were worth more than $100m (£61.7m), on electronic exchanges that valued them at $17.50 apiece. Moments later, the price appeared to crash to just pennies, because of irregular trading on Mt Gox.

The latest disaster will fuel the online debate over whether Bitcoin can become a serious currency, or is simply too volatile. As mainstream interest began to take off last month, the US dollar-value of Bitcoins surged 1,000 per cent. Earlier this month, it crashed by 30 per cent on a single day.

Hundreds of small online merchants and Bitcoin adherents have started to accept the currency as payment for goods and services, though no major retailers do.

The currency has started to attract the attention of politicians in the US after reports that Bitcoins have been used to purchase illegal drugs. Last month, US Senator Chuck Schumer called Bitcoin "an online form of money laundering used to disguise the source of money".

Start your day with The Independent, sign up for daily news emails
News
A poster by Durham Constabulary
news
Arts and Entertainment
books New York Times slammed over summer reading list
Sport
Cameron Jerome
footballCanaries beat Boro to gain promotion to the Premier League
Arts and Entertainment
Performers drink tea at the Glastonbury festival in 2010
music
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Neil Pavier: Management Accountant

£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

Sheridan Maine: Commercial Accountant

£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

Laura Norton: Project Accountant

£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

Day In a Page

Abuse - and the hell that came afterwards

Abuse - and the hell that follows

James Rhodes on the extraordinary legal battle to publish his memoir
Why we need a 'tranquility map' of England, according to campaigners

It's oh so quiet!

The case for a 'tranquility map' of England
'Timeless fashion': It may be a paradox, but the industry loves it

'Timeless fashion'

It may be a paradox, but the industry loves it
If the West needs a bridge to the 'moderates' inside Isis, maybe we could have done with Osama bin Laden staying alive after all

Could have done with Osama bin Laden staying alive?

Robert Fisk on the Fountainheads of World Evil in 2011 - and 2015
New exhibition celebrates the evolution of swimwear

Evolution of swimwear

From bathing dresses in the twenties to modern bikinis
Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine