The Bitcoin payment processor Mt.Gox today said that it would not re-instate Bitcoin withdrawals until it was happy that the underlying system for tracking transactions was completely secure.

The company made the announcement in a press release explaining exactly why it had been forced to put a hold on transactions for now.

Ultimately, it seems as if ‘transaction malleability’ is the problem – the ability for someone to make it look like a Bitcoin transaction didn’t take place, when in fact it did. As the transaction then appears unsent, there’s the possibility that it will be carried out again and the Bitcoins re-sent for a second time.

While Mt.Gox says a software bug is to blame for the issue, it claims it’s a wider problem that affects any system that involves sending Bitcoins to a third-party. As a result, it has ultimately decided to maintain its hold on withdrawals until it has been fixed:

The problem we have identified is not limited to Mt.Gox, and affects all transactions where Bitcoins are being sent to a third party. We believe that the changes required for addressing this issue will be positive over the long term for the whole community. As a result we took the necessary action of suspending Bitcoin withdrawals until this technical issue has been resolved.

As the largest Bitcoin exchange, there’s a lot of attention on Mt.Gox and the virtual currency. With software bugs still evident, outright bans and highly volatile valuations, there’s clearly still a long way to go before Bitcoin can prove itself as a viable, stable and secure digital currency.

As a result of this latest situation, the value of Bitcoin has been plunging rapidy. From valuations once in excess of $1,000 per Bitcoin, the virtual currency is now trading at around $570 on most exchanges and lost more than $43 in 30 minutes alone today, according to Bitcoin Market on Twitter.

Featured Image Credit – Zach Copley/Flickr

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