The failure of Mt. Gox, once the world's largest bitcoin exchanges, has hurt market confidence in the virtual currency in China and prompted many Chinese investors to question its liability.

Mt. Gox's website went blank on Tuesday amid accusations it had suffered a massive theft. [Hong Kong Company Formation & Registration]The Tokyo-based exchange said it decided to "close all transactions for the time being in order to protect the site and our users."

The exchange did not say when it would resume its services, which allow investors to withdraw bitcoins.

The website failure prompted many to take to social media to express their anger and shock. One user of Sina Weibo, the popular Twitter-like service in China, said the website breakdown was "a disaster" for the bitcoin market.

"Such platforms are not subject to government regulation and therefore investors' interests could not be safeguarded," said a Sina Weibo user with the screen name "BEELEE9." The microblogger claimed that he lost two and a half bitcoins on Mt. Gox.

Another Sina Weibo user, "Luo Huilin," said the loss of two bitcoins on Mt. Gox made him worry about transaction security on other exchange platforms.

Bitcoins, stored in a virtual wallet, can pass from person to person around the world in secret, allowing users to remain anonymous. It bypasses both banks and banking regulators worldwide.

The Chinese public became aware of the digital currency in April, when movie star Jet Li's One Foundation received a donation of several hundred bitcoins to help quake-stricken Sichuan province. Later, it triggered a speculative frenzy.

Bitcoins have been at the center of controversy ever since they were created in 2009. Chinese regulators warned of the risks related to the digital currency in December.

In a statement, five government departments, [company registration in Hong Kong, Hong Kong company incorporation]including the central bank, said bitcoins are not issued by any monetary authorities and do not have the currency function of being legal tender with a government decree. They do not have the same legal status as fiat currencies, and should not be circulated in the market.

The agencies demanded financial and payment institutions not price their products or services with bitcoins, or engage in transactions involving bitcoins, or accept insurances related to bitcoins.

"Bitcoins are a string of code and their virtual nature means that they are easy targets for computer viruses and hacker thefts," said a bitcoin investor named Liu Bo.

Investors should be cautious when entering the market as bitcoins can be traded 24 hours a day while there are no limits on price fluctuations.

On BTC China, the main bitcoin trading platform in the country, bitcoin were being traded at about 3,500 yuan, down about two percent over the past three days. But their price has slumped more than fifty percent from the record high of about 8,000 yuan in November.

"Mt. Gox's tragic violation of users' trust was the result of one company's abhorrent actions and does not reflect the resilience or value of bitcoins and the digital currency industry," BTC China said in a joint statement with five other exchanges worldwide.

Such a statement is not enough to quell the controversy and market jitters, said experts.

Ding Zhaoyong, an associate professor at Jilin University, said investors should be wary that if one of the major bitcoin exchanges goes bankrupt, the bitcoin market might encounter a systematic crisis.

Gao Chaoxin, an investment manager at Yeequn Investment Holdings Ltd., said Chinese investors piled into bitcoins in a speculative frenzy because there are few better investment options in the real economy.

Zhu Rong, a bitcoin investor in Zhejiang Province, said many domestic bitcoin exchanges have servers of their trading platforms operating overseas while the exchanges are not registered in China.

"If they 'flee' with the bitcoins, the investors will not know where to get them back," said Zhu.

"If Mt. Gox becomes insolvent and the bitcoins can not be withdrawn, it could only be defined as infringement of interests. But the virtual nature means that it would not be easy to get the evidence," said Zhu.