Bitcoins to be Shut Down?Written by Michael Levanduski
August 14, 2013 # 11:31 am # Industry News, Legal Challenges, Marketing Insights, Specials # 3 Comments
Bitcoin, the digital currency which has gained a lot of attention and success over the past several years, has been running into some issues recently. The first, and most significant, of these problems is concerning the security of the currency. Hackers have been attempting to find ways to steal the currency, and with some success. Most recently, Bitcoin had to warn users of the Android-based bitcoin wallet that they were vulnerable to theft.
This specific threat has more to do with the Android app than bitcoin itself, but the result is the same. Criminals are able to access the bitcoin accounts of users, and take their money. The warning was posted on bitcoin.org notifying users of the issues, and recommending that they update their apps as soon as a fix is available. They currently have links to updated versions of four of the most popular bitcoin wallets for Android, as well as instructions on how to fix the vulnerability. Those who are using an outdated and insecure wallet app, the page says, should “send your bitcoins to a Bitcoin wallet on your computer.”
While the fix has been put in place, the concern is still very real. Due to the anonymity of the system, it is extremely difficult to track down this type of theft, and once the bitcoins are out of your wallet, it is very unlikely that you’ll ever get them back. This vulnerability is just the latest in a series of problems the bitcoin system has had recently. Defenders of the digital currency believe that this is just part of the growing process, and these types of bugs need to be worked out. In addition, many believe, the rate of theft and vulnerability is still low when compared to carrying physical cash, or relying on the stability of currencies backed by governments.
These vulnerabilities have attracted the attention of the New York Department of Financial Services, who recently sent out subpoenas to 22 digital currency companies and investors, including bitcoin. They are investigating potential regulatory guidelines to see what restrictions should be put in place for these digital currencies.
Benjamin M. Lawsky, the Superintendent of Financial Services, released a notice which said the following.
The emergence of Bitcoin and other virtual currencies has presented a number of unique opportunities and challenges. Building innovative platforms for conducting commerce can help improve the depth and breadth of our nation’s financial system. However, we have also seen instances where the cloak of anonymity provided by virtual currencies has helped support dangerous criminal activity, such as drug smuggling, money laundering, gun running and child pornography.
The goal of the investigation and any regulations which are put on these digital currencies, according to the notice, is to “help build greater confidence among customers” of bitcoin as well as finding ways to prevent any illegal activity from taking place using these currencies. The notice goes on to say that the DFS wants to help improve the transparency of these currencies.
Of course, part of the reason why many people are using bitcoin is precisely because they don’t want the transparency. Whether because their activities are illegal, or simply because they feel that where they spend their money is none of the governments, or anyone else’s business.
The future of Bitcoin and other digital currencies is certainly at a critical stage. As more and more people begin using this form of currency, and the regulators attempt to get involved with it, there will be increased uncertainty. This will, undoubtedly, bring in additional volatility to the digital market.
Do you use or accept bitcoin payments? If so, what has your experience been like? Are you worried about hackers? Please, share your thoughts in the comments below.
You can see the full notice from the New York Department of Financial Services HERE.