After the failure of the largest Bitcoin exchange Mt. Gox, its users were forced to spread out to different locations to trade in cryptocurrencies. There are lots of alternatives available, but the majority of people found a new home at Bitstamp and BTC-e. Both have been around for quite some time, but that is no guarantee for safety. Especially BTC-e seems ‘shady’. Over the past weeks, a growing number of people are questioning the safety in using the largely anonymous exchange.
Nothing to be found
BTC-e takes pride in remaining anonymous to its users and the whole world. Little is known about this exchange. Some scarce information can be found on the website, mostly about Bitcoin and how certain BTC-e services should be used. But what if we want to know what country BTC-e is operating from and who is behind it? There’s evidence that BTC-e is already benefiting from the Mt. Gox halt; a Tuesday update on BTC-e’s support website noted that the support system would be moved to a new platform “in order to cope with the increased number of client requests.” How safe is it to trade through an organisation that leaves everyone in the dark about all kinds of vital information?
So is this actually a problem? BTC-e is, of course, entitled to secrecy. Nobody can force the exchange to give out information and, as long as the exchange keeps working, most of its users won’t see any harm in this. But what will happens when the exchange starts facing problems? The website’s administrator will have to step up and make statements to ensure people keep faith in BTC-e’s services. That might be tricky, since it is impossible to contact this ‘person’. Not knowing his or her identity is one thing, but being completely absent on your own website is another matter. Especially taking into account the service this exchange lends to its users.
When one tries to contact the administrator, a window pops up with the following response: “Please use tickets to contact us about any questions & problems.” There is no email address easily available on the website. Several people have already tried to contact BTC-e about this lack of information, but the exchange fails to respond to any of these questions. Neither through the support system or BTC-e’s Twitter account.
Talking about that Twitter account, the contrast between its followers and people followed by the account itself is huge. Huge as in 13,000 followers versus zero people followed. A week ago, @btcecom was following one account, Charlie Shrem. The New York-based bitcoin entrepreneur was arrested in late January on charges of alleged links to the bitcoin-only drug market Silk Road. Today, the account follows no one.
Too many secrets
So exactly how dangerous is it to place money and trust in BTC-e? Nobody knows for sure. The fact that BTC-e’s location is unknown puts fear in the hearts of many traders. If anything were to happen, there would be no way to know whom to talk to. Protests like the ones outside the Mt. Gox office would prove impossible, since nobody knows where to find them. What laws does the exchange have to comply to? There’s a good chance BTC-e is based in Russia. That would be bad news, since holding ‘surrogate currency’ is illegal there. The Russian government has also indicated it is investigating BTC-e.
So far, there have been no real problems with BTC-e. Still, the amount of people that went there in the Mt. Gox aftermath make this a very large exchange. People put faith in BTC-e, they assume their money is safe there. We saw the same thing at Mt. Gox. If a similar scenario were to happen with BTC-e, this could result in a battle against unknown people. With Mt. Gox, we at least have Mark Karpeles to hold responsible.
Bottom line, beware of trading through BTC-e. When using it, always keep in mind that there’s a reason its founders are keeping secrets. In a world like BTC-e’s, keeping secrets usually isn’t a good thing…