Bitcoin exchange Kraken put a brief halt on US dollar withdrawals and suspended USD deposits today, offering customers a 2% bonus to convert their balances to euros (EUR).

"Many USD withdrawals have been delayed beyond a limit we can accept, and it reflects poorly on our service," a customer support representative said.

Customers can now select the 'Convert USD to EUR' option on its support page, either for one withdrawal or the entire account. Converting EUR amounts back to USD for USD-only bank accounts would incur a fee of less than 1%, Kraken said.

The company claims the problem was caused by a recent increase in US dollar transaction volume, much of which came from outside the United States, and temporarily overwhelmed Kraken's current US banking partner.

The exchange has indicated that it actually prefers customers to use non-US currencies.

Kraken CEO Jesse Powell said US dollars represented only a small piece of the company's business, and that dealing with USD and its associated headaches cost it more in customer service and agent time than it earned in revenue.

"We're still doing dollar withdrawals and dollar trading; we just don't want to take any more new dollars," he said.

Most Kraken customers trading in USD are not even US residents. Powell recommended those customers should switch to euros, where liquidity was greater and transaction fees were lower.

"We haven't even been going after the US market at all. We just offer the dollar because we're able to. In hindsight we probably should not have [...] at least until we have a more robust banking partner."

"In the meantime we're emailing all the users with dollar balances, offering to convert their balances to euros; they can trade on the euro if they want to."

The company was currently in negotiation with a couple of other banks, Powell said, and would reactivate USD deposits then.

Despite the recent debacle surrounding Mt. Gox, he said while Kraken had "not heard any panicked phone calls" the topic had a chilling effect and was bound to come up in meetings over the next couple of days.

"I don't see the point of offering a service that's just going to be an exercise in frustration," he concluded.

"If it's not a good service, if we can't do it well, then why do it?"