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LibertyBit Suspends Operations

Op-ed - LibertyBit Suspends Operations

LibertyBit, the second largest Bitcoin exchange in Canada, has announced that it is suspending its operations and returning all funds to customers. The root cause of the shutdown is the closure of its RBC bank account on May 17 as well as “a surge of fraudulent transactions”. LibertyBit writes:

The effects have been two-fold: 1) Inflicting monetary losses on the company and 2) Damaging our primary banking relationships. These circumstances make it infeasible to continue operating the service without significant changes to our transfer system and identification measures. We feel it is our responsibility to pause operations now rather than risk any customer funds becoming vulnerable. We will be working in the coming weeks with partners and our legal counsel to overcome these obstacles and implement new measures to prevent these types of setbacks in the future.

Fortunately, no user funds have been lost, although withdrawals will be slower than usual; LibertyBit anticipates a waiting time of 1-3 days for BTC withdrawal and 2-10 business days for USD and CAD withdrawal. Additionally, the Interac E-transfer withdrawal option is no longer available, and users with CAD stored in the exchange will need to provide their banking info in order to be able to withdraw by direct deposit.

This is not the first time an exchange has declared a temporary shutdown for security reasons; Bitcoin Central did the same thing in late April following a medium-scale hack which emptied a relatively small, but nevertheless substantial, portion of their stored Bitcoin funds. In both cases, the shutdown was graceful, with users being able to recover their funds. The question is, will Libertybit’s shutdown actually be temporary? Most shutdowns so far have proven to be permanent, and as much as 45 of all Bitcoin exchanges to have ever existed are now defunct, but there is precedent: Bitfloor and TradeHill have both managed to restart themselves after a prolonged and unscheduled downtime; in the latter case, the shutdown lasted for over a year and the exchange restarted with a completely different target market and brand.

In the meantime, Canadian Bitcoin users are encouraged to head over to CaVirtex or buy them in person at the next Toronto Bitcoin meetup. Additionally, BTCTo is currently in its testing phase and will soon be opening its doors.