Vircurex, a small Bitcoin exchange in Beijing, released a statement in which it said that accounts held by customers will become frozen today. This is due to the fact that large withdrawals over the past few weeks have almost used up all of Vircurex’s funds.
In the last year, the small Bitcoin exchange experienced two hacking incidents that caused them to lose funds. It has since been trying to earn back the losses.
Details of Vircurex
When compared to the largest China-based Bitcoin exchange, BTC China, who traded more than 202,000 bitcoins within the last 30 days, Vircurex only traded 54 bitcoins in the same time frame. This is according to statistics by Bitcion Charts.
After the fall of Mt. Gox, Vircurex is the most recent Bitcoin exchange to go through financial issues. Mt. Gox had lost around 650,000 bitcoins due to lack of security and an apparent DDOS attack.
On its website, Vircurex said that it had lost “a significant” amount of its funds within the last year because of the two hacking incidents. The small Bitcoin exchange said that it was recovering from the losses by conducting normal trading and collecting fees.
Too Many Withdrawals Means Too Many Problem
Vircurex had enough funding to allow for trading of bitcoins and other virtual currencies; however it was not enough to do so if many of the customers decided to suddenly withdraw at once. The small Bitcoin exchange said,
“Unfortunately we had large fund withdrawals in the last weeks which have lead to a complete depletion of our cold wallet balance”
This meant that Vircurex doesn’t have enough in their reserve to allow for further activity. The exchange also says,
“And we are now facing the option of either closing the site with significant unrecoverable losses for all or to work out a solution that allows the exchange to continue to operate and gradually pay back the losses.”
Vircurex then outlined a plan that described what it would do. It has decided to distribute the remaining of the virtual currency balances to depositors. The depositors’ accounts will be known as “frozen balance.” The small Bitcoin exchange explains,
“Funds in this balance type cannot be used to trade or withdraw. Those are the balances that the exchange will gradually pay back and hence transfer back to the available balance over time.”
Users will be receiving their funds; however, the time in which this will happen is not listed on the website. It is good that Vircurex is taking the initiative to do something of its lack of funding, however, it brings about the question: could this perhaps happen to other Bitcoin exchanges?