A young Australian entrepreneur says his bitcoin website has been hacked and thieves have stolen more than $1 million in virtual currency.

Unlike old currencies bitcoin is digital, traded computer-to-computer, and often used to pay for goods and services on the internet.

But it has no central authority or government-based backing, and the alleged theft - one of the largest in the currency's four-year history - raises questions about digital money and if it can ever be regulated.

A bitcoin user who calls himself TradeFortress says more than 4,100 bitcoins worth about $1.1 million have been robbed from his website.

The stolen bitcoins are owned by the users of his website, who had trusted their bitcoins to him.

TradeFortress, who says he is not much older than 18, does not want to be identified because he is worried about his personal safety.

He and his users know the chances of getting their bitcoins back are extremely unlikely because bitcoin transactions cannot be reversed.

The bitcoin transaction trail is designed to be anonymous, which has led to speculation this was an inside job and that TradeFortress took the coins for himself.

Space to play or pause, M to mute, left and right arrows to seek, up and down arrows for volume. Listen Duration: 3 minutes 12 seconds 3 m 12 s Massive bitcoin robbery hits Australian website, raises questions over regulations ( Will Ockenden ) Download 1.5 MB

But when asked by the ABC's AM he strenuously denied those accusations, and said that despite his $1 million loss he is unlikely to report the theft to the police.

"The police don't have access to any more information than any user does when it comes to bitcoin. Some say it gives them control of their money," TradeFortress said.

A spokesman for the Australian Federal Police says to his knowledge, a theft of bitcoins has never been investigated at either a federal or state level.

But he says if it was reported, it would be treated like any other theft.

Bitcoins raise questions over regulation and policing

Technology commentator Stilgherrian says the appeal of bitcoin theft, as opposed to stocks or bonds, lies in its inability to be traced.

He says bitcoins are already raising big questions over regulations, policing and even taxation.

"Once you've got the bitcoin there's no way, well no easy way, of telling where you got that from," he said.

"So from a money laundering point of view, it's very attractive.

"We're talking about roughly a million dollars worth of bitcoin gone. That puts it up there with some of the biggest bank robberies in history."

At today's exchange rates, each bitcoin is worth about $275. At the beginning of the year, they were worth about $30 each.

The quick and massive rise in the value of bitcoins has given the currency a higher profile, but Sthilgarian says it is also attracting more criminals.

"People rob banks because that's where the money is, your bitcoin wallet which is really just a digital file sitting on your computer, can be just as vulnerable and just as attractive," he said.

"And the more of it that is out there, the more thieves will be drawn to it."