TECH TALK: Cryptocurrencies are on the rise, but regulation is creeping up the agenda, says BILL MAGEE
Facebook may have grabbed the recent online headlines, following its worldwide outages, but another incident in the virtual world has gone almost unnoticed despite sending cryptocurrency devotees into a cyberspin. All because of a dodgy text.
Ever since digital cash infiltrated traditional money markets in 2008, as an alternative means of financial payment and reaction to the global financial crash, it has gained a reputation for volatility.
The latest drawback involves a flaw exploited within digital asset exchange Coinbase’s endlessly tested two-factor authentication system, on which its estimated 56 million members depend for financial security.
Hackers found a weakness in the SMS text account recovery process, plundering cash from the digital wallets of 6,000 clients who were unwittingly duped. Coinbase has stressed it has now been fixed and all customers reimbursed.
How much was stolen has not been revealed but even if a single coin was taken from each crypto loser, my calculations make minimum losses of around £250 million, probably exponentially more, given such an opportunistic breach.
It represented a classic phishing scam involving a spot of social engineering, fraudulently sending emails purporting to be from a reputable source to trick users into revealing their credentials including email addresses, passwords and phone numbers.
Yet, despite such persistent security weaknesses in the crypto money marketplace, it’s not holding back ultra-bullish predictions of further highs. The market has been boosted by global influencers such as Twitter founder Jack Dorsey and Tesla boss Elon Musk as well as by El Salvador as the first sovereign national to make Bitcoin legal tender.
Given such executive endorsement, what could possibly go wrong? In a digitised economy, investors seem all in for such a slew of borderless global currencies headed up by Bitcoin, Cardano, and Ethereum.
The US Federal Reserve has raised the crypto stakes by announcing it has no plans to ban digital currencies, but says they should be regulated, although it has been saying this since digital currency first became serious money around 14 years ago.
It has taken China a decade-plus to finally decide to ban cryptocurrencies altogether, but this won’t stop it launching its own tightly-controlled digital money before too long.
Yes, it is likely digital currencies will have greater regulatory oversight, but this should positively shore-up the sector for the longer term, maintains Nigel Green, CEO and founder of asset manager deVere Group. “Bitcoin has stormed back after a mini-dip..and could hit fresh all-time highs of $100,000 by the end of 2021,” he says.
Also, expect a sustained and growing interest from institutional investors, including Wall Street giants and major payments companies, ensuring digital money is baked into the market on a permanent basis.
It’s clear crypto cash has changed forever the way the world handles its finances, conducts transactions, manages assets and generally does business. How far it is absorbed into the money mainstream remains to be seen.
As for under-pressure Facebook, it announced its own cryptocurrency “Libra”, rebranded “Diem”, but, to date, only rudimentary experimental code has been released.
The embattled social media giant plans to launch infrastructure for a basket of multiple currencies. But regulated, as a sign of what’s surely to come in the digital money marketplace.