Bitstamp Suspends Operations After $5M Breach Acknowledged

Bitstamp, the European bitcoin exchange, confirmed Monday about $5 million in bitcoins was stolen from its hot wallets. The exchange was taken offline after the theft of 18,866 bitcoins was discovered.

Bitstamp CEO Nejc Kodrič said the hack occurred Sunday but customer accounts "will be honored in full."

"This breach represents a small fraction of Bitstamp’s total bitcoin reserves, the overwhelming majority of which are are held in secure offline cold storage systems. We would like to reassure all Bitstamp customers that their balances held prior to our temporary suspension of services will not be affected," Kodrič said in a statement.

No one has yet claimed responsibility for the hack.

The British exchange, the second-largest dollar-bitcoin exchange, suspended services about 3 a.m. EST and has yet to resume operations.

Last February, Mt. Gox, the Japanese bitcoin exchange that had been handling 70 percent of all bitcoin transactions,was forced it into bankruptcy after an estimated $450 million disappeared, although 200,000 of the 850,000 missing bitcoins were later found.

VentureBeat reported the Bitstamp hack comes on the heels of a 70 percent drop in bitcoin values in 2014. Bitcoin value fell to $267 Monday from a high of $1,240 before the Mt. Gox collapse, ZDNet reported.

Bitcoin proponents had been hoping to expand the currency's use into the consumer arena, but most merchants don't accept the currency and consumers find little reason to use bitcoins over traditional currency, VentureBeat noted. The currency is mostly held by speculators and investors, said Grace Caffyn, assistant editor at Coindesk.

Bitcoin charts shows Bitstamp as the third-largest bitcoin exchange handling 6 percent of transactions, behind BTCN in China with 74 percent and Bitfinex in Hong Kong with 12 percent. Like Bitstamp, Bitfinex trades in dollars.

ZDNet said the most recent proof-of-reserve showed Bitstamp held 183,497 bitcoins in its cold wallet reserve in May, about $96.9 million. Kodrič has said the company attempts to keep 85 percent to 90 percent of customer funds in cold storage.