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The $600m crypto heist – commentary from ASI’s Richard Dunbar

Richard Dunbar, Head of Research at Aberdeen Standard Investments shares his thoughts on the recent $600m cryptocurrency heist.

“Cryptocurrency is increasingly being used, yet it remains, in many areas of its usage, the ‘wild west’ in terms of regulation and consumer protection. There are plans underway to bring it more into the mainstream – not least the discussion within and between central banks on developing their own version of digital currencies. However, in the meantime this fraud does show that real money is being lost and real fraud is being executed – although the more established areas of the currency and financial world have not been immune to this either.

“Crytpo has been an extremely volatile asset which has made it much less attractive to many potential users. The questions are therefore certainly, how are the company recipients, such as cinema chain AMC, going to know what it’s worth? And what cryptocurrency liabilities do they have that they’re trying to match with cryptocurrency assets? This may not matter given the small sums currently involved, but it is worth bearing in mind. From an AMC perspective, they’re probably trying to tap into the younger market, which is increasingly using this as a means of exchange. However, I suspect that this decision has been driven more by their marketing department than from their finance department, which may be a little more circumspect?

“Environmental issues associated with crypto is another concern, so much so that it has been described as ‘the coal-fired currency’. There are rooms full of computers all over the world, operating day and night to maintain the currency, verify transactions, and solve the complex equations needed to create more bitcoins. One blockchain payment is tens of thousands of times more energy demanding than a Visa payment and bitcoin’s global carbon emission is roughly equivalent to that of a mid-sized country like Sweden. Tesla are probably the highest profile example who’ve been willing to take cryptocurrencies but then have changed their mind for various reasons, including the environmental impacts.

“With all his in mind, it still feels a long way away from the mainstream – but with many smart minds focused on how it might become so.”

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