Big bitcoin exchange 'fixes' trading glitch

Game maker Zynga's decision to accept bitcoins pushed the value of the virtual cash to new heights

Trading on one of the largest bitcoin exchanges is set to resume after it identified a technical problem that left it vulnerable to disruption.

MTGox halted transfers of the digital currency to external addresses on 7 February after it spotted what it called "unusual activity".

The company's action caused bitcoin values to slump from their mid-January high of $1,000 (£600) to about $540.

MTGox said customers should be able to start withdrawing funds "soon".

The Tokyo-based firm said its investigation into the unusual activity revealed a loophole that thieves could use to fool the transaction process into sending double the correct number of bitcoins.

It also left it vulnerable to attacks, which slowed down the rate at which coins could be bought and sold.

Staff confronted

This problem revolved around what are known as bitcoin wallets - an essential part of the entire bitcoin system and the place where bitcoin addresses - the virtual post-boxes where each bitcoin is stored - are kept.

Cash withdrawals and transfers of bitcoins to - rather than from - bitcoin wallets were unaffected by the loophole.

The suspension of withdrawals led some bitcoin traders to travel to Japan to confront MTGox's staff and demand the return of their currency.

The loophole was also thought to have been exploited by thieves, who stole about $2.7m in bitcoins from the Silk Road 2 website.

In a statement, MTGox said it had found a way to combat the loophole by issuing unique identifiers for each transaction. This, it said, should prevent "fraudulent" abuse of the transaction process.

So far, MTGox has not said when withdrawals might start again but said it would issue another update by 20 February at the latest.

When withdrawals do re-start, MTGox said it would moderate the pace of trades to iron out any problems with the new system.