Bitcoin falls on RM128m hack of cryptocurrency peer

by BLOOMBERG

 • Bitcoin slipped from a record after the US$31 million (RM128.34 million) theft of a cryptocurrency peer renewed concern about the security of digital coins.

The company behind tether, a cryptocurrency used by bitcoin exchanges to facilitate trades with fiat currencies, announced the theft yesterday. It said in a statement that a “malicious” attacker removed tokens from the Tether Treasury wallet on Nov 19 and sent them to an unauthorised bitcoin address. The company said it’s trying to prevent the stolen coins from being used.

Bitcoin dropped as much as 5.4% to US$7,798.73, before paring the decline to 0.7% at 11:32am in London yesterday.

The incident is the latest in a long list of hacks that have dented confidence in the safety of cryptocurrencies. It’s likely to fuel the debate on Wall Street over whether digital coins are secure enough to enter the mainstream of finance. The effect seems short-lived on bitcoin, which after exceeding the US$133 billion value of McDonald’s Corp over the weekend erased most of its loss yesterday and was little changed at US$8,190.15.

Tether, with a market capitalisation of US$675 million, is the world’s 20th most-valuable virtual currency, according to data on Coinmarketcap. com. The tokens are pegged to fiat currencies, allowing users to store and transfer globally and instantly, according to the website. The company behind tether has said that the tokens are 100% backed by fiat currencies.

Tether has become part of the bitcoin ecosystem because it helps exchanges facilitate trades against currencies like the dollar, euro and yen, according to Arthur Hayes, CEO of BitMEX, a cryptocurrency derivatives venue in Hong Kong. Anti-money laundering and know-your-customer rules have prevented many bitcoin exchanges from opening bank accounts needed to hold fiat currencies.

The theft has renewed concerns over tether’s viability. Scepticism had already been building after the company behind the tokens said in April that all international wires had been blocked by its Taiwanese banks. That fuelled questions about whether the tokens were fully backed back fiat currencies.

“If tether is actually fundamentally compromised, that will be a very big issue for many exchanges,” Hayes said. “The knee-jerk reaction was that fear.” — Bloomberg