Bitcoin exchange Bitstamp halts withdrawals, citing attack

Bitstamp, one of the biggest online bitcoin exchanges, has suspended withdrawals in the latest setback for the virtual currency after a service disruption at another major exchange last week.

A denial-of-service attack, in which a website is flooded with massive requests for data, obstructed Bitstamp’s ability to check account balances, the exchange said in a statement. Customers won’t be able to withdraw funds until a fix is issued, and transactions that failed Monday and Tuesday will be canceled, the company said.

Bitcoin is a digital currency that can be used to buy a variety of things, including Tesla Motors Inc. cars. Mt.Gox, an online exchange based in Tokyo, said Feb. 7 that it stopped withdrawals because of a technical issue. The virtual currency has since declined about 19%, according to the CoinDesk Bitcoin Price Index, which averages exchange prices.

“This is a nuisance attack,” said Andreas Antonopoulos, chief security officer for Blockchain.info, a provider of online wallets for a digital currencies. “Funds have not been lost and have not been affected. What it’s done is slow down their accounting system from reconciling transactions.”

Antonoupoulos said withdrawals will probably resume within two days.

“No funds have been lost and no funds are at risk,” Bitstamp said in the statement. A message sent to Bitstamp’s office seeking comment wasn’t immediately returned.

The governments of India, China and Russia have sought to ban or limit the use of bitcoins, which exist as software and aren’t controlled by any central authority. Some U.S.-based exchanges have either closed at the behest of law enforcement or had difficulties obtaining business bank accounts because of regulatory concerns.

Mt.Gox said Monday that services were restored and that customers can take out cash “as normal.”