The demise of virtual financial institutions trading in Bitcoin (BTC) – the pioneer and most well-known digital currency, is increasing. It started 2 weeks ago when Mount Gox, the largest Bitcoin exchange based in Tokyo, went bust allegedly mainly due to hacking. Next victim was Flexicoin, the Canadian Bitcoin bank, which has also gone under on account of cyber theft earlier this week. Latest news is that hackers have helped themselves to Bitcoins in Poloniex’s virtual vault as well.
Common to all the 3 cases is that Bitcoin is unregulated, and thus trading risk of institutions dealing in this currency is not covered under the standard currency exchange regulations. The latest news has strengthened the position that virtual currencies need to be brought under traditional exchange regulations to ensure compliance with the onerous security measures against the likes of cyber crime, and thus protect investors and holders of such currencies.
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The biggest question now is whether digital technology is capable of safe liberalisation of currency exchange across the world as it did with democratisation of knowledge? Can peers rely only on cryptography in conducting virtual currency transactions and not worry about restrictive traditional exchange regulations? Only time will tell, but clearly governments are growing anxious with the current Bitcoin cyber theft trend.
While there is focus on digital currencies due to latest hacking incidents, it is worth mentioning that traditional currencies are also not spared by cybercriminals, as the Chief eNitiater – Bra Willy, learnt recently. More about his experience in the next post.
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