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 statement.
"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 transactions.
"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 denial-of-service
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 guardrails to protect
consumers and root out money laundering without stifling beneficial
innovation," Lawsky said in a speech at the New America Foundation
[to top of second column]
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 proposed
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.
(Additional reporting by Karen Freifeld
in New York. editing by Andre Grenon and Ken Wills)
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