Technology

Tether Hack Is A Serious Issue For All Crypto-Currencies

The company behind Tether, a start-up that offers dollar-backed digital tokens, recently announced that a hacker stole more than $30 million worth of cryptocurrency from them. As you consider the significance of the Tether hack, and how it could fuel the debate over whether digital coins are secure enough to enter the mainstream world of finance, and/or any other cryptocurrency trends, we believe you’ll find it helpful to read the following comments from Anthony Tu-Sekine, partner with Seward & Kissel LLP and a member of the firm’s Blockchain and Cryptocurrency Group.

Tether Hack
rebcenter-moscow / Pixabay

Anthony brings his extensive experience in domestic and cross-border capital markets transactions and fund formation to the emerging area of blockchain and cryptocurrency and has advised issuers, funds and advisers in connection with cryptocurrency issuances and investments. 

His initial thoughts on the Tether hack are below.

“To date, many of the thefts or losses of cryptocurrency seem to be the result of exploitable bugs in digital wallets rather than the actual blockchain itself. Until wallets become more secure and more easily accessible to users that have only minimal technical background, cryptocurrency and crypto token may not see widespread acceptance. Unfortunately, those two goals, security and accessibility, often work against each other.

This presents a conundrum for asset managers and other financial intermediaries that manage or hold funds of clients; these advisers and financial intermediaries are subject to a number of regulations with respect to custody of client assets, and their regulators will demand proof that these advisers and intermediaries comply with the applicable regulations. This, together with security issues, may be a gating item for many advisers, and it may take the establishment of a number of entities whose primary function will be custody and security for many asset managers to more fully embrace cryptocurrencies. There are a number of projects in the pipeline so this may help with this issue.

The other consideration from a legal perspective is whether issuers expose themselves to liability if they rush their tokens to market. If an issuer is rushing its product to market and is later found to have acted negligently, it could be found liable for damages to investors; similarly, it could have liability to its investors under the securities laws. “

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