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During November 2013, the China-based Bitcoin exchange [[BTC China]] overtook Japan-based Mt. Gox and Europe-based [[Bitstamp]] to become the largest Bitcoin trading exchange by trade volume.<ref>2013-11-18, [http://techcrunch.com/2013/11/18/btc-china-series-a/ As Chinese Investors Pile Into Bitcoin, China’s Oldest Exchange, BTC China, Raises $5M From Lightspeed], Techcrunch</ref> On 19 November 2013, the value of Bitcoin on the Mt. Gox exchange soared to a peak of US$900 following a United States Senate committee hearing, at which the committee was informed that virtual currencies were a legitimate financial service.<ref>2013-11-19, [http://www.bbc.co.uk/news/technology-24986264 'Legitimate' Bitcoin's value soars after Senate hearing], BBC News</ref> On the same day, one bitcoin traded for [[Renminbi|RMB]]¥6780 (US$1100) on BTC China.<ref>2013-11-19, [http://www.prisonplanet.com/bitcoin-trades-over-1000-on-btc-china-exchange-and-crashes-30-then-rebounds.html Bitcoin Trades Over $1000 On BTC China Exchange And Crashes 30% … Then Rebounds], Prison Planet</ref> With roughly 12 million bitcoins in existence, the new price means that the market cap for Bitcoin is at least US$7.2 billion.<ref>Wasserman, Todd. November 18 2013 Mashable. "[http://mashable.com/2013/11/18/bitcoin-600/ Bitcoin Tops $600, Up 60x Over the Last Year]"</ref>
===Theft and exchange shutdowns===▼
It is possible to steal bitcoins; theft has been documented on numerous occasions. At other times, Bitcoin exchanges have shut down, taking their clients' bitcoins with them. A ''Wired'' study showed that 45 percent of Bitcoin exchanges end up closing.<ref name=Wired.co.UK>{{cite web|title=Study: 45 percent of Bitcoin exchanges end up closing▼
|url=http://www.wired.co.uk/news/archive/2013-04/26/large-bitcoin-exchanges-attacks|accessdate=28 April 2013|quote=© Condé Nast UK 2013 |archiveurl=http://www.wired.co.uk/news/archive/2013-04/26/large-bitcoin-exchanges-attacks|archivedate=2013-04-26 |deadurl=no}} Wired.co.uk (26 April 2013).</ref>▼
==Economics==
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===Money laundering===
Fears have arisen that Bitcoin may be used to launder money, and a 2012 report by the FBI acknowledged these fears but stated that there were no known instances of this occurring.<ref name=fbi_report>{{cite web | url=http://cryptome.org/2012/05/fbi-bitcoin.pdf | title=Bitcoins Virtual Currency: Unique Features Present Challenges for Deterring Illicit Activity | publisher=FBI | work=Cyber Intelligence Section and Criminal Intelligence Section | date=24 April 2012 | accessdate=20 October 2013}}</ref> However, in 2013 US authorities seized assets belonging to Mt. Gox, a service that allowed users to exchange bitcoins for US dollars.<ref>{{cite web | url=http://gawker.com/feds-seize-assets-of-worlds-largest-bitcoin-exchange-506790294 | title=Feds Seize Assets of World's Largest Bitcoin Exchange | publisher=Gawker Media | work=gawker.com | date=15 May 2013 | accessdate=20 October 2013 | author=Chen, Adrian}}</ref> Some say one obstacle to bitcoins becoming widely used to launder money may be the fact that the transaction history is public.<ref name=FistfulPaper201308>{{cite web |url=http://cseweb.ucsd.edu/~smeiklejohn/files/imc13.pdf |title=A Fistful of Bitcoins: Characterizing Payments Among Men with No Names |last=Meiklejohn |first=Sarah ''et al.'' |date=23 October 2013 (formal publication) |publisher=Association for Computing Machinery (ACM) |archiveurl= |archivedate=September __, 2013 }} • Paper is explained by {{cite news |url= http://www.pcworld.com/article/2047608/bitcoin-offers-privacy-as-long-as-you-dont-cash-out-or-spend-it.html |title=Bitcoin offers privacy—as long as you don't cash out or spend it |last=Kirk |first=Jeremy |date=28 August 2013 |work=PC World}}</ref>
▲==Theft and exchange shutdowns==
▲It is possible to steal bitcoins; theft has been documented on numerous occasions. At other times, Bitcoin exchanges have shut down, taking their clients' bitcoins with them. A ''Wired'' study showed that 45 percent of Bitcoin exchanges end up closing.<ref name=Wired.co.UK>{{cite web|title=Study: 45 percent of Bitcoin exchanges end up closing
▲|url=http://www.wired.co.uk/news/archive/2013-04/26/large-bitcoin-exchanges-attacks|accessdate=28 April 2013|quote=© Condé Nast UK 2013 |archiveurl=http://www.wired.co.uk/news/archive/2013-04/26/large-bitcoin-exchanges-attacks|archivedate=2013-04-26 |deadurl=no}} Wired.co.uk (26 April 2013).</ref>
On 19 June 2011, a security breach of the Mt. Gox Bitcoin exchange caused the nominal price of a bitcoin to fraudulently drop to one cent on the Mt. Gox exchange, after a hacker allegedly used credentials from a Mt. Gox auditor's compromised computer illegally to transfer a large number of bitcoins to himself. They used the exchange's software to sell them all nominally, creating a massive "ask" order at any price. Within minutes the price reverted to its correct user-traded value.<ref>{{cite web|last= Karpeles |first= Mark |title= Clarification of Mt Gox Compromised Accounts and Major Bitcoin Sell-Off |date= 30 June 2011 |url= https://mtgox.com/press_release_20110630.html |publisher= Tibanne Co. Ltd. |archiveurl=http://archive.is/2DHQ |archivedate=8 December 2012 |deadurl=no}}</ref><ref>{{cite web|date= 19 June 2011 |url= https://www.youtube.com/watch?v=T1X6qQt9ONg |title= Bitcoin Report Volume 8 – (FLASHCRASH) |publisher= YouTube BitcoinChannel}}</ref><ref name="mick">{{cite web|last= Mick |first= Jason |title= Inside the Mega-Hack of Bitcoin: the Full Story |date= 19 June 2011 |url= http://www.dailytech.com/Inside+the+MegaHack+of+Bitcoin+the+Full+Story/article21942.htm |publisher= [[DailyTech]] |archiveurl=http://archive.is/fsllb |archivedate=2 January 2013 |deadurl=no}}</ref><ref>Lee, Timothy B. (19 June 2011) {{cite web |url=http://arstechnica.com/tech-policy/news/2011/06/bitcoin-price-plummets-on-compromised-exchange.ars |title=Bitcoin prices plummet on hacked exchange |archiveurl=http://archive.is/Oa40 |archivedate=9 July 2012 |deadurl=no}}, Ars Technica</ref><ref>Karpeles, Mark (20 June 2011) [https://support.mtgox.com/entries/20208066-huge-bitcoin-sell-off-due-to-a-compromised-account-rollback Huge Bitcoin sell off due to a compromised account – rollback], Mt.Gox Support {{Dead link|url=https://support.mtgox.com/entries/20208066-huge-bitcoin-sell-off-due-to-a-compromised-account-rollback|date=April 2013}}</ref><ref name="register1">{{Cite news|title= Bitcoin collapses on malicious trade – Mt Gox scrambling to raise the Titanic |url= http://www.theregister.co.uk/2011/06/19/bitcoin_values_collapse_again/|date=19 June 2011 |author= Chirgwin, Richard |publisher= The Register |archiveurl=http://archive.is/X2SOt |archivedate=14 January 2013 |deadurl=no}}</ref> Accounts with the equivalent of more than US$8,750,000 were affected.<ref name="mick" />
In July 2011, the operator of Bitomat, the third largest Bitcoin exchange, announced that he lost access to his wallet.dat file with about 17,000 bitcoins (roughly equivalent to US$220,000 at that time). He announced that he would sell the service for the missing amount, aiming to use funds from the sale to refund his customers.<ref>Dotson, Kyt (1 August 2011) {{cite web |url=http://siliconangle.com/blog/2011/08/01/third-largest-bitcoin-exchange-bitomat-lost-their-wallet-over-17000-bitcoins-missing/ |title=Third Largest Bitcoin Exchange Bitomat Lost Their Wallet, Over 17,000 Bitcoins Missing |archiveurl=http://archive.is/6hfI |archivedate=30 July 2012 |deadurl=no}}. SiliconAngle</ref>
In August 2011, MyBitcoin, a now defunct Bitcoin transaction processor, declared that it was hacked, which caused it to be shut down, with paying 49% on customer deposits, leaving more than 78,000 bitcoins (roughly equivalent to US$800,000 at that time) unaccounted for.<ref>Jeffries, Adrianne (8 August 2011) {{cite web |url=http://betabeat.com/2011/08/mybitcoin-spokesman-finally-comes-forward-what-did-you-think-we-did-after-the-hack-we-got-shitfaced/ |title=MyBitcoin Spokesman Finally Comes Forward: "What Did You Think We Did After the Hack? We Got Shitfaced" |archiveurl=http://archive.is/epilS |archivedate=18 January 2013 |deadurl=no}}. BetaBeat</ref><ref>Jeffries, Adrianne (19 August 2011) {{cite web |url=http://betabeat.com/2011/08/search-for-owners-of-mybitcoin-loses-steam/ |title=Search for Owners of MyBitcoin Loses Steam |archiveurl=http://archive.is/yRvWb |archivedate=18 January 2013 |deadurl=no}}. BetaBeat</ref>
In early August 2012, a lawsuit was filed in San Francisco court against Bitcoinica — a Bitcoin trading venue — claiming about US$460,000 from the company. Bitcoinica was hacked twice in 2012, which led to allegations that the venue neglected the safety of customers' money and cheated them out of withdrawal requests.<ref>Geuss, Megan (12 August 2012) {{cite web |url=http://arstechnica.com/tech-policy/2012/08/bitcoinica-users-sue-for-460k-in-lost-bitcoins/ |title=Bitcoinica users sue for $460k in lost bitcoins |archiveurl=http://archive.is/5nN6V |archivedate=17 January 2013 |deadurl=no}}. Arstechnica</ref><ref>Peck, Morgen (15 August 2012) {{cite web |url=http://spectrum.ieee.org/tech-talk/computing/networks/first-bitcoin-lawsuit-filed-in-san-francisco |title=First Bitcoin Lawsuit Filed In San Francisco |archiveurl=http://archive.is/QHa2m |archivedate=15 April 2013 |deadurl=no}}. IEEE Spectrum</ref>
In late August 2012, an operation titled Bitcoin Savings and Trust was shut down by the owner, allegedly leaving around US$5.6 million in Bitcoin-based debts; this led to allegations that the operation was a [[Ponzi scheme]].<ref>{{cite web|title= Bitcoin ponzi scheme – investors lose $5 million USD in online hedge fund |url= http://rt.com/usa/news/investors-currency-digital-fund-868/|date=29 August 2012 |publisher= [[RT (TV network)|RT]] |archiveurl=http://archive.is/cAPZ |archivedate=6 December 2012 |deadurl=no}}</ref><ref>{{cite web|last= Jeffries |first= Adrianne |title= Suspected multi-million dollar Bitcoin pyramid scheme shuts down, investors revolt |url= http://www.theverge.com/2012/8/27/3271637/bitcoin-savings-trust-pyramid-scheme-shuts-down |publisher= [[The Verge]] |date=27 August 2012 |archiveurl=http://archive.is/4SplF |archivedate=5 January 2013 |deadurl=no}}</ref><ref>{{cite web|last= Mick |first= Jason |title= "Pirateat40" Makes Off $5.6M USD in BitCoins From Pyramid Scheme |date= 28 August 2012 |url= http://www.dailytech.com/Pirateat40+Makes+Off+56M+USD+in+BitCoins+From+Pyramid+Scheme/article25538.htm |publisher= [[DailyTech]] |archiveurl=http://archive.is/N8bzd |archivedate=2 January 2013 |deadurl=no}}</ref><ref>{{cite web|last= Mott |first= Nathaniel |title= Bitcoin: How a Virtual Currency Became Real with a $5.6M Fraud |date= 31 August 2012 |url= http://pandodaily.com/2012/08/31/bitcoin-how-a-virtual-currency-became-real-with-a-5-6m-fraud/ |publisher= [[PandoDaily]] |archiveurl=http://archive.is/YvTD8 |archivedate=31 January 2013 |deadurl=no}}</ref> In September 2012, the [[U.S. Securities and Exchange Commission]] had reportedly started an investigation on the case.<ref>Foxton, Willard (2 September 2012) {{cite web |url=http://blogs.telegraph.co.uk/technology/willardfoxton2/100007836/bitcoin-pirate-scandal-sec-steps-in-amid-allegations-that-the-whole-thing-was-a-ponzi-scheme/ |title=Bitcoin 'Pirate' scandal: SEC steps in amid allegations that the whole thing was a Ponzi scheme |archiveurl=http://archive.is/kO3uI |archivedate=21 April 2013 |deadurl=no}}. The Telegraph</ref>
In September 2012, Bitfloor, a Bitcoin exchange, also reported being hacked, with 24,000 bitcoins (worth about US$250,000) stolen. As a result, Bitfloor suspended operations.<ref>{{Cite news|title= Bitcoin theft causes Bitfloor exchange to go offline |url= http://www.bbc.co.uk/news/technology-19486695 |date= 25 September 2012 |publisher= BBC News |archiveurl=http://archive.is/LvdDP |archivedate=19 April 2013 |deadurl=no}}</ref><ref>{{cite web|last= Goddard |first= Louis |title= Bitcoin exchange BitFloor suspends operations after $250,000 theft |date= 5 September 2012 |url= http://www.theverge.com/2012/9/5/3293375/bitfloor-bitcoin-exchange-suspended-theft |publisher= [[The Verge]] |archiveurl=http://archive.is/4h4JX |archivedate=4 February 2013 |deadurl=no}}</ref> The same month, Bitfloor resumed operations; its founder said that he reported the theft to FBI, and that he plans to repay the victims, though the time frame for repayment is unclear.<ref>{{Cite news|title= Bitcoin exchange back online after hack |url= http://www.pcworld.com/article/2010586/bitcoin-exchange-back-online-after-hack.html?tk=rel_news |date= 25 September 2012 |last= Chirgwin |first= Richard |publisher= [[PC World]] |archiveurl=http://archive.is/Y87fW |archivedate=31 January 2013 |deadurl=no}}</ref>
On 3 April 2013, Instawallet, a web-based wallet provider, was hacked,<ref name=cutler13insta>{{cite web|last= Cutler |first= Kim-Mai |title= Another Bitcoin Wallet Service, Instawallet, Suffers Attack, Shuts Down Until Further Notice |date= 3 April 2013 |url= http://techcrunch.com/2013/04/03/bitcoin-instawallet/ |publisher= [[TechCrunch]] |accessdate= 12 April 2013 |archiveurl=http://archive.is/qOW7p |archivedate=29 April 2013 |deadurl=no}}</ref> resulting in the theft of over 35,000 bitcoins<ref>{{cite web |url=http://blockchain.info/tx/5c265c7f63176a07d8c1a90c336e8faac133e69b95eb29e69026377781ebdd1e |title=Transaction details for bitcoins stolen from Instawallet |archiveurl=http://archive.is/2ehIK |archivedate=29 April 2013 |deadurl=no}}. Blockchain.info (3 April 2013). Retrieved 20 April 2013.</ref> which were valued at US$129.90 per bitcoin at the time, or nearly $4.6 million in total. As a result Instawallet suspended operations.<ref name=cutler13insta/>
On 11 August 2013, the Bitcoin Foundation announced that a bug in a [[pseudorandom number generator]] within the [[Android (operating system)|Android operating system]] had been exploited to steal from wallets generated by Android apps; fixes were provided 13 August 2013.<ref name=TheRegister20130812>{{cite web |url=http://www.theregister.co.uk/2013/08/12/android_bug_batters_bitcoin_wallets/ |title=Android bug batters Bitcoin wallets / Old flaw, new problem |last=Chirgwin |first=Richard |date=12 August 2013 |website=The Register |archiveurl=http://www.webcitation.org/6IwX8oDIN |archivedate=17 August 2013 }} ● Original Bitcoin announcement: {{cite web |url=http://bitcoin.org/en/alert/2013-08-11-android |title=Android Security Vulnerability |date=11 August 2013 |publisher=bitcoin.org |archiveurl=http://www.webcitation.org/6IwXaL2GC |archivedate=17 August 2013 }}</ref>
A Bitcoin bank, operated from Australia but stored on servers in the USA, was hacked on 23 and 26 October 2013, causing a loss of 4100 bitcoins, worth over A$1 million.<ref>{{cite web |url=http://www.smh.com.au/it-pro/security-it/australian-bitcoin-bank-hacked-1m-stolen-20131108-hv2iv.html |title=Australian Bitcoin bank hacked |archivedate= 8 November 2013 |accessdate= 9 November 2013 |deadurl=no}}. Retrieved 9 November 2013.</ref>
In Hong Kong a Bitcoin trading platform owned by Global Bond Limited (GBL) vanished with 30 million yuan (US$5 million) from 500 investors on 26th October 2013.<ref>{{cite web |url=http://www.zdnet.com/hong-kong-bitcoin-trading-platform-vanishes-with-millions-7000023039/ |title=Hong Kong Bitcoin Trading Platform Vanishes with millions|archivedate= 12 November 2013 |accessdate= 18 November 2013 |deadurl=no}}</ref>
==Taxation and regulation==
In 2012, the Cryptocurrency Legal Advocacy Group (CLAG) stressed the importance for taxpayers to determine whether taxes are due on a Bitcoin-related transaction based on whether one has experienced a "realization event": when a taxpayer has provided a service in exchange for bitcoins, a realization event has probably occurred and any gain or loss would likely be calculated using fair market values for the service provided."<ref name="BitCoin Tax issues Oct 2012">{{cite journal | title=2012 TNT 209-4 NEWS ANALYSIS: VIRTUAL CURRENCY: A NEW WORRY FOR TAX ADMINISTRATORS?. (Release Date: OCTOBER 17, 2012) (Doc 2012-21516) | author=Stewart, David D. and Soong Johnston, Stephanie D. | journal=Tax Notes Today | year=2012 | month=29 October | volume=2012 TNT 209-4 | issue=2012 TNT 209–4}}</ref>
In August 2013 the German Finance Ministry characterized Bitcoin as a [[unit of account]],<ref name=Marketwatch20130819>{{cite web |url=http://blogs.marketwatch.com/thetell/2013/08/19/bitcoins-are-private-money-in-germany/ |title=Bitcoins are private money in Germany |last=Vaishampayan |first=Saumya |date=19 August 2013 |website=[[Marketwatch]] |archiveurl=http://www.webcitation.org/6JJIqfMJn |archivedate=1 September 2013 }}</ref><ref name=FAZ20130816/> usable in [[Clearing house (finance)|multilateral clearing circles]] and subject to capital gains tax if held less than one year.<ref name=FAZ20130816>{{cite news|url=http://www.faz.net/aktuell/finanzen/devisen-rohstoffe/digitale-waehrung-deutschland-erkennt-bitcoins-als-privates-geld-an-12535059.html|title=Deutschland erkennt Bitcoins als privates Geld an (Germany recognizes Bitcoin as private money) |last=Nestler |first=Franz|date=16 August 2013 |website=[[Frankfurter Allgemeine Zeitung]] |archiveurl= |archivedate= }}</ref>
==Reception==
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