The collapse of a major bitcoin exchange in Japan has some experts warning of hastened regulation of virtual currency among global governments.

The reported hacking theft of 740,000 bitcoins (more than $300 million U.S.) from the exchange “is just the latest in the long line of unrecoverable thefts,” said financial analyst Peter Leeds in an email.

“The network was always at risk, but now with a sudden drop of over 20 per cent (in the virtual currency’s value) a tipping point is being approached which would derail the entire system.”

Leeds said the demise of the Tokyo-based bitcoin trader Mt. Gox will force complacent governments to cobble new regulation, as well as discourage individuals from using the “crypto-currency.”

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But Joseph David, the CEO of the Canadian Virtual Exchange, said he would welcome greater oversight, arguing that the system here is stable and can sustain more scrutiny to bolster public confidence.

David added that domestic virtual exchanges are subject to currency trading compliance laws under anti-laundering and anti-terrorism statues, for example. He said the CVE has conservatively confined its transactions to Canadian residents and complies with requirements including those that prohibit anonymous exchanges of Canadian currency amounting to more than $3,000 (Cdn.) per month.

David said the CVA has conducted Canadian currency and bitcoin exchange transactions valued at more than $73 million over three years and has 34,000 customers. He said adoption is surging and sales of bitcoins advanced after the collapse in Japan triggered the currency’s drop in value.

David said the Canadian exchange enjoyed a trading surge after the Mt. Gox theft triggered a decline in the currency’s value to about $470 (U.S.) from $550 over several hours.

On bitcoin exchanges, the currency’s value has fallen to about $470 from $550 in the past few hours. The figure was already down more than 50 per cent on the price of $1,200 per bitcoin reached on Mt. Gox three months ago.

“We’ve been criticized for not going international but that’s how we’ve avoided a lot of problems with security,” David said. “We are completely stable and we are not affected by these issues. We as a community just want Mt. Gox to go away.”

The head of the Bitcoin Alliance of Canada says the collapse of Mt. Gox, following months of secret catastrophic losses, serves as a warning to those who buy and trade in the popular digital currency.

Anthony Di Iorio, the executive director at the non-profit organization, advises that the lesson to be learned is that large amounts of Bitcoins should not be left on any exchange or service due to possible security risks.

“The great thing about Bitcoin is that you can be your own bank and nobody has access to your funds,” he said Tuesday.

“But if you are putting them in an exchange, and you’re buying and selling, you have to have them stored there at least for a small amount of time.”

The risk with leaving money languishing with a third-party is that if the site shuts down, the investment can be gone with it.

The website of Mt. Gox was returning a blank page Tuesday following the resignation Sunday of Mt. Gox CEO Mark Karpeles from the board of the Bitcoin Foundation, a group seeking legitimacy for the currency, and a withdrawal ban imposed at the exchange earlier this month.

Prominent members of the bitcoin community, meanwhile — including San Francisco-based wallet service Coinbase and Chinese exchange BTC China — sought to shore up confidence in the currency in a statement that said Mt. Gox abused users’ trust.

“As with any new industry, there are certain bad actors that need to be weeded out, and that is what we are seeing today,” their joint statement said.

Documents purportedly leaked from the company lay out the scale of the problem. An 11-page “Crisis Strategy Draft” published on the blog of entrepreneur and bitcoin enthusiast Ryan Selkis says that 740,000 Bit coins are missing from Mt. Gox.

“At the risk of appearing hyperbolic, this could be the end of bitcoin, at least for most of the public,” the draft said.

The scandal may cost bitcoin enthusiasts dear.

At the Tokyo office tower housing Mt. Gox, bitcoin trader Kolin Burgess said he had picketed the building since Feb. 14 after flying in from London, hoping to get back $320,000 he has tied up in bitcoins with Mt. Gox.

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“I may have lost all of my money,” said Burgess, next to placards asking if Mt. Gox is bankrupt. “It hasn’t shaken my trust in bitcoin, but it has shaken my trust in bitcoin exchanges.”

Mt. Gox CEO Karpeles did not immediately return several messages seeking comment. A security officer at the office tower said no one from Mt. Gox was in the building. Tibbane, an Internet company that Karpeles is CEO of, still has its name listed on the building’s directory.

“I have no idea” where they are, said Burgess, the trader. “I’m both annoyed and worried.”

The disappearance of Mt. Gox could be fatal for bitcoin, which was started in 2009 as a currency free from government controls. bitcoin’s boosters say the currency’s design make it impossible to counterfeit and difficult to manipulate, and the virtual money has won an eclectic mix of die-hard fans, including libertarians, tech enthusiasts and adventurous investors.

But the currency has struggled to shake off its associations with criminality, particularly its role in powering the now-defunct online drug marketplace Silk Road. Only last month another member of the Bitcoin Foundation, Vice Chairman Charlie Shrem, was arrested at New York’s Kennedy Airport on charges of money laundering.

Authorities have been taking an increasingly hard look at bitcoin and related virtual currencies including Litecoin, Namecoin, Ripple, and countless others. Some countries, including Russia, have effectively banned the currency. In other jurisdictions, authorities are weighing whether to try to tame the marketplace through licences or other mechanisms.

Even if Mt. Gox doesn’t drag bitcoin down with it, there’s fear that the exchange’s demise will push officials to take an even more skeptical stance.

“I think this is disastrous from a (regulatory) standpoint,” Selkis, the enthusiast, said in a message posted to Twitter. “The hammer will now come down hard.”

Bitcoin was started in 2009 as an unregulated currency, free of control from governments and central banks. There are an estimated 21 million bitcoins in circulation, but statistics on their usage are unavailable.

Some countries, including Russia, have effectively banned the currency. It is not recognized as legal tender by the Bank of Canada and, in other jurisdictions, authorities are weighing whether to try to tame the marketplace through licenses or other mechanisms.

To access bitcoin, users set up and manage a digital wallet and can process transactions using their smartphones.

The digital currency is seen as more convenient than other forms of payments because they can be sent directly and instantly from one person to another and do not include processing and other fees usually charged by banks or third parties.

Lisa Kramer, an associate finance professor in Toronto, said the shut down is not a surprise because Mt. Gox has been dealing with serious security issues for several months, including users recently being banned from making withdrawals.

“Bitcoin has been operating in limbo for some time. The writing has been on the wall,” said Lisa Kramer, with the Rotman School of Management at the University of Toronto.

“A lot of economists had been predicting that Bitcoins days are numbered.”

Kramer said people use Bitcoin due to convenience and ease, and Mt. Gox shows that these reasons may no longer apply.

“A centre point of any currency’s existence is that users have faith in its stability as a medium of exchange. When you need your currency, it needs to be there for you. Mt. Gox has been having trouble obtaining their Bitcoins for some time now and now it looks like they won’t get their Bitcoins at all,” she said.

“This will decrease trust in Bitcoins.”

With files from Star wire services

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