UPDATE (17th February 08:15 BST): This article has been updated with additional comment and information from Cavirtex regarding the exchange closure.

Canadian bitcoin exchange Cavirtex has announced that it will shut down operations next month following the compromise of sensitive security information, including password hashes and two-factor authentication secrets.

The company announced the closure in a 17th February post on its website, citing the risks of continued operation due to damage done to the exchange's reputation. The post stated that Cavirtex remains solvent and that client funds were unaffected during the incident.

Vice president of the Calgary-based exchange Kyle Kemper told CoinDesk that the exchange has been the target of hackers for some time, and acknowledged that given the ongoing security risks, customer balances are at risk of being stolen.

Kemper said:

Kemper said that customers have been asked to alter account information on the website, including passwords, as well as re-input withdrawal balances. The closure announcement also advised users to clear all site cookies.

Trading on the exchange will cease on 20th March, and balance withdrawals will proceed until 25th March.

The exchange closure notably follows new regulations passed in Quebec just days ago, though at the time the exchange indicated it was planning to work to meet the needs of government officials. Another bitcoin exchange, Vault of Satoshi, announced its closure in early January.

The company said that it doesn't believe that all information related to account security has been compromised, but that its procedures moving forward will take those risks into account.

Cavirtex said in a statement:

The exchange declined to comment on when cryptocurrency withdrawals would be reinstated, noting that fiat withdrawals are still active and reiterating requests that users resubmit withdrawal addresses for their accounts.

According to Cavirtex, other factors behind the closure include continued problems with its banking partner.

The company declined to name the bank, but said that the costs of doing business proved difficult in the long-term.

"It was just a difficult time for us," Kemper said. "As opposed to being viewed as a valuable client partner with them, and having a good relationship with your bank, it was more a role where they were just trying to get as much out of us as they could."

Following the publication of this article, Cavirtex provided an additional statement on the banking issues, explaining:

When asked about shareholders of the company, including investors who used the Havelock Investments platform to purchase shares during a virtual IPO in 2013, Kemper said that the company is "operating with shareholders in mind", but suggested that the value of those shares could be impacted as the exchange moves to closure.

Kemper said that Cavirtex plans to first pay out customer balances before addressing shareholder value, which includes those who had previously purchased shares on Havelock.

“Depending on what the balance closing is, they will see a payout," he said, adding, “Anytime a company decides that it is shutting down – that doesn’t really do much good for the value."

Images via Cavirtex, Shutterstock