Fidelity Cryptocurrency Move Could Make It Prime 'Hack Bait'
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A cybersecurity specialist has expressed concern that the Fidelity Investments’ decision to move into cryptocurrency could make the company prime ‘hack bait’.
On Wednesday, it was reported that Fidelity, one of the largest asset managers in the world, was in the process of hiring developers to build a cryptocurrency exchange.
According to an internal correspondence seen by Business Insider, executives had notified employees that they were looking for a DevOps System Engineer to reportedly, “help engineer, create and deploy a Digital Asset Exchange to both a public and private cloud.”
However, the CEO of the blockchain cybersecurity firm Hosho, Yo Kwon, has spoken out against the move. He argues that the proposed transition to cryptocurrency could leave Fidelity, which had $2.4trn. in assets under management as of December 2017, vulnerable to attack by malicious agents.
“While it’s great that a company like Fidelity is moving towards blockchain and digital asset adoption, the risk factors associated with the move are that much greater. Fidelity will potentially introduce a large number of users onto its exchange, which by extension, means a large amount of assets being moved around.Fidelity could expose themselves as hacker bait — the greater the bait, the more motivated hackers will be to get inside.”
Formerly a pariah asset, since the beginning of the year, there has been a noticeable and public increase in interest for institutional investors in cryptocurrency.
Last month, Goldman Sachs announced it was going ahead with plans to create a bitcoin trading desk, headed by Justin Schmidt, the firm’s first digital assets trader; something Crypto Briefing reported on at the time.
Similarly, Christine Lagarde of the International Monetary Fund (IMF) has cautiously recognized the potential that cryptocurrency could bring to society with fast and inexpensive transactions as well as the added security brought by Distributed Ledger Technology (DLT).
The fourth largest asset management firm in the world, Fidelity’s decision to lay the foundations for its own crypto exchange will be met with strong approval from many institutional investors keen to get into digital currency but still waiting on the sidelines.
However, it could also create consternation among many of the smaller, retail-orientated exchanges that have until recently, been the singular gateway into the sector. Although still unconfirmed, there have already been reports of substantial OTC trades going on as investment firms start recognizing the value of cryptocurrency.
A cyber-security firm, Hosho principally assists companies with smart contract operation as well as auditing. Last week it was reported that the firm would be working with the logistics blockchain platform, VeChain Thor, to ensure the security of the VET network.
The dangers of a successful cyber attack on exchanges are always too real. This year alone, CoinCheck and Bitgrail have had millions of dollars worth of crypto stolen from their servers.
Although lessons about storing whole funds in hot wallets have (hopefully) been learned by the sector, outsiders run the risk of falling into the very same pitfalls.
The American stock exchange NASDAQ has already brought advisors from the crypto exchange Gemini to oversee that its own cryptocurrency trading are safe from fraud and manipulation.
Disclaimer: The author is invested in BTC, which is mentioned in this article.