Exchange Vircurex Freezes Withdrawals, Claims Lack of Reserves

Vircurex, the Chinese crzptocurrenies exchange, has halted withdrawals due to the lack of reserves.

Vircurex, the Beijing-based virtual currency exchange, suspended withdrawals Monday as it claimed it did not have the necessary reserves to fulfill customer requests. Photo: Wogker/Flickr

Vircurex, the Beijing-based virtual currency exchange, suspended withdrawals Monday as it claimed it did not have the necessary reserves to fulfill customer requests. Photo: Wogker/Flickr

Vircurex, a small Chinese bitcoin exchange, located in Beijin. Had frozen cryptocurrencies accounts of its customers, because of big withdrawing operations that drained all of Vircurex funds.

It is the second time when the company faces major problems. The first time was last year, when Vircurex suffered from hacker attacks.

Vircurex opened in October 2011, and provided exchange between Bitcoin, Euro and U.S. dollar and up to 18 other digital currencies against each other. It also eliminated the least popular coins.

The value of the company’s funds is extremely low for the marker. It traded 54 bitcoins during the last month as it was calculated by Bitcoin Charts. The digital is especially tiny in compare with the value of BTC-Chia’s transaction with is more than 202,000 bitcoin per month.

Vircurex lost the major part of its holdings during last year and after that they assured its customers that they will cover all losses by collecting a fee from usual trading operations.

The power of this exchange allowed providing of bitcoins, litecoin, feathercoin and terracoin trade, but it was not ready for the sudden withdraw of many depositors.

‘Fractional reserve’ worries bitcoin investors for a long period of time since the finances of virtual currency exchanges, which are mostly unregulated worldwide, are often opaque.

What is more, large fund withdrawals in the last weeks led to delete of “cold wallet”. The cold wallet is an offline cryptocurrencies secure storage.

 “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 representative said.

The first trading and withdrawal bugs appeared in the end of February and early March of 2014. The site stopped proving exchange between any currencies last week and it announced the freeze after that.

All losses this time will be covered according to ‘top-down/bottom-up’ logic: the half of funds the company has will be paid to the biggest balance holders and the other half will be given to the smallest investors. This logic guarantees that new customers would not be punished and Vircurex could provide operations until the funds have been returned.

 “All users will eventually receive their funds, though the timeframe depends on the monthly volume available,” Vircurex stated.

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