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April 14, 2014

Bitcoin exchange searching for culprits after theft

For virtual currency skeptics, a £300 million theft has done little to reassure. So was MtGox the unfortunate victim of a targeted cyber attack or rather the inevitable 'first of many' digital bank heists to come?

One of the world’s largest bitcoin exchanges says that it is now searching for thieves who stole almost £300 million worth of the digital currency.

MtGox’s announcement came after the company revealed there is a "high probability" that a bug in its system gave attackers access to around 750,000 of its customers' bitcoins. According to BBC reports, a further 100,000 of the company’s own bitcoins were also taken.

So does this demonstrate the inherent risk to investors who speculate in virtual currency or has MtGox simply been the unfortunate victim of a targeted cyber-attack?

The theft has ultimately led to the end of MtGox. The company filed for bankruptcy in its native Japan last week, just days after it was forced to shut its website down because of the attack. Only time will tell what this kind of security breach means for the future of the bitcoin itself.

Almost 40% drop in value

The value of the bitcoin suffered massively as a result of the collapse - the exchange rate before the incident stood at around $800 but this fell to little over $500 in the space of a few days - a drop of almost 40 per cent.

A spokesperson from MtGox said that before the true extent of the damage could be revealed, the company would have to investigate a sizeable number of transaction reports in order to "establish the truth" about what happened.

The theft has also sparked the Japanese government to take a closer look at how bitcoins are used and traded. Some experts are saying that new laws could be introduced to prevent further issues.

The head of IT at the country’s ruling Liberal Democratic Party, Takuya Hirai, was quoted by as saying: "We haven’t yet thoroughly grasped the situation, but some kind of regulation is needed from the perspective of consumer protection, and we will also discuss (bitcoin) from the perspective of imposing asset tax."

Flexcoin, another bitcoin bank, has also said that it will be closing down after 896 coins were stolen. It too is working with police in the hope of recovering its customers’ money.