For years, the digital-asset industry has sought to shake up finance by stripping away the intermediaries, delays and controls that govern the movement of money on Wall Street. The pitch: faster transactions, final settlement and fewer middlemen with the power to intervene.
But the largest crypto heist on record has exposed the dangers — and limits — of that pitch. A system built to move money without restraint offers few ways to stop it when it is stolen, threatening to cement the Wild West reputation the industry has spent years trying to escape.
Tokens stolen in the $6.3 billion Binance hack could be tracked across public blockchains in real time, but billions of dollars remained beyond the reach of those trying to recover them. Tether and Circle, issuers of the two largest stablecoins, were able to freeze some of the stolen tokens because they retained a form of centralized control that much of crypto was designed to eliminate.
Now, as crypto seeks a larger place in American finance, the scale of the theft is stirring unease among market participants over whether the industry has been too quick to discard the checks and delays common in traditional finance. In one corner of crypto, the response is already taking shape. Decentralized-finance provider, Unit, has introduced delays on deposits and withdrawals to give it more time to identify potentially stolen assets.
“I don’t want T+1 but maybe T+1 hour,” said Tian Zeng, chief executive officer of crypto hedge fund Third Eye, referring to TradFi’s practice of settling trades one day after execution. “The idea is to make settlements longer, with more layers, so that hackers can’t take money out this quickly.”