Friday, 05 June 2020

Cryptopia Hack - Global and local implications

Bell Gully's Campbell Pentney says Cryptopia wasn't large enough for the hack to have a substantial effect on the broader market for cryptocurrency, but the exchange provided support for a number of niche cryptocurrencies, which could struggle to trade, particularly if Cryptopia held a large portion of those assets.

Other implications of the hack would depend on whether the funds were permanently lost or whether Cryptopia bounced back and was in a position to refund customers, Pentney says.

However, even reimbursement could be tricky, as cryptocurrency prices may have fluctuated since the time of the hack.

"In some ways this is a more complicated situation than previous high-profile exchange hacks, as there are indications dozens of different cryptocurrencies may be involved. This makes the tracking and reimbursement process more difficult."

New Zealanders who lost money permanently through the theft might be able to apply for tax relief, Pentney says.

Meanwhile, the Cryptopia hack could jeopardise plans the company had to relaunch a New Zealand dollar-backed 'tether' currency this year. The Christchurch company said in November it had backing from an unnamed bank to bring back the New Zealand Dollar Token, or NZDT, the country's first cryptocurrency tethered to the NZ dollar.

The NZDT was launched under the radar in May 2017, after several speakers at the annual blockchain conference raised problems they were having without one.

However, it was pulled last year after Cryptopia's bank, ASB, raised concerns about regulatory issues and difficulties identifying customers and their activities.

Pentney said the hack could raise "reputational or liability concerns" for a potential banking partner.

NZ Police said on Wednesday the Cryptopia theft is "a complex situation" and they couldn't say how long the investigation will take.

"We are aware of speculation in the online community about what might have occurred. It is too early for us to draw any conclusions and Police will keep an open mind on all possibilities while we gather the information we need.

"A priority for police is to identify and, if possible, recover missing funds for Cryptopia customers. However there are likely to be many challenges to achieving this.

Cryptopia employs about 100 staff in New Zealand and the UK. Management hasn't commented on the theft.

Adam Lyness, business development director at Cryptopia shareholder Intranel, spoke on behalf of Cryptopia at the Blockworks blockchain conference in Auckland last November.

He says the news isn't great for shareholders, who have been told that all comment should come through official NZ Police channels.

However he says Intranel isn't dependent on Cryptopia for its business and has been a "silent shareholder" since November.

Legal disclaimer: The insight, recommendations and analysis presented here are based on corporate filings, current events, interviews, corporate press releases, and what we've learned as financial journalists. They are presented for the purposes of general information only, and all the information belongs to the original publishers. These may contain errors and we make no promises as to the accuracy or usefulness of the information we present. You should not make any investment decision based solely on what you read here.

Creamcoin Marketcap