Security firm Trustwave announced this week that they have discovered the largest-ever criminal hack on bitcoins. Such schemes have overwhelmed speculators and technology fans, so the leading virtual currency is rapidly waning in value as the world’s largest bitcoin exchange, Mt. Gox, remains shuttered in the wake of a massive heist.
“This is extremely destructive,” said Mark Williams, a risk-management expert and former Federal Reserve Bank examiner. “What we’re seeing is a lot of the flaws. It’s not only fragile, it’s fragile as eggshells.”
The mysterious circumstances that triggered the failure of the exchange, Mt. Gox in Tokyo, is only adding to the renewed anxiety over the virtual currency, which just a month earlier had been gaining momentum and supporters.
After saying users could not withdraw their funds, Mt. Gox suddenly ceased all operations, including shutting down its website. Mt. Gox users may have lost more than $300 million worth of bitcoins in what was the latest and biggest in a series of recent setbacks for the virtual currency.
Some bitcoin advocates are trying to pass this off as a temporary hitch on the road to their libertarian utopia where governments no longer control the money supply. Unfortunately for the dreamers, thieves and shuttered exchanges are guaranteeing that virtual currencies will not survive without government intervention. Either bitcoins will become more like other kinds of money, or they will pass as a billionaires’ fad.