Bitcoin exchange Vircurex suspends withdrawals to battle insolvency

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Bitcoin Exchange Vircurex has stopped withdrawals of Bitcoin, Litecoin and other digital currencies after it revealed that the exchange is running into serious financial issues.

In a statement published on its website on Sunday, Vircurex announced that all existing user accounts will be freezed starting Monday.

The Beijing-based virtual currency exchange suffered significant losses after it faced two hacking attacks last year. The company claimed to have been using its own income to compensate users affected by the security breaches.

However, due to “large fund withdrawals in the last weeks,” Vircurex was left with only two options either to close down the site entirely or freeze all user deposits and withdrawals until a solution is found.

“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,” the company said.

Vircurex claims it has chosen the second option to prevent the service from shutting down entirely. The decision on the part of the exchange to freeze all withdrawals will mean that customers won’t be able to withdraw their deposits not just in Bitcoin but also in Litecoin, feathercoin and terracoin.

The company also said it will create a new balance type called ‘Frozen Funds’ which will cover all balances in the aforementioned currencies.

“Funds in this balance type cannot be used to trade or withdraw,” Vircurex said.

“Those are the balances that the exchange will gradually pay back and hence transfer back to the available balance over time. The freezing of the balances is a one-time action, it does not affect future deposits in any ways.”

The news follows recent sudden shutdowns of some of the prominent Bitcoin exchanges including the shutdown of the once-dominant Bitcoin exchange Mt. Gox on February 25, Flexcoin on March 5, and Crypto-Trade on Febuary 27.