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'Bitcoin is bad for crime': Bitwise Asset Management CEO

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Bitwise Asset Management CEO Hunter Horsley joined Yahoo Finance Live to break down the cybersecurity risks of cryptocurrency.

Video Transcript

- All right, 45 minutes to the closing bell, we got the news that hackers had broken into Electronic Arts. They stole source code. This on top of what we witnessed with the meat processor, JBS. They paid $11 million in crypto to get back control of their systems. And then there was the Colonial Pipeline situation. They paid 4 million. Federal government's recovered 2.3 million of that Bitcoin payment in you might call it hostage payment.

But let's bring in someone who understands what's going on, and perhaps ways that this can be circumvented, Hunter Horsley. He is the CEO of Bitwise Asset Management. And I want to jump to something that those of us who don't deal daily with Bitcoin need help understanding. I had a guest on almost two months ago and said, why would we not regulate, say, Bitcoin if we keep seeing it used in these nefarious ways, to which they responded, it's blockchain, you know exactly who's on the other end of it. If that's the case, why is Bitcoin bad-- you know, in-- why is it used in these situations?

HUNTER HORSLEY: Yeah, yeah, that's a great question, Adam. I think that the story with-- that we saw in the Colonial Pipeline exploit, as well as JBS, is that Bitcoin is bad for crime. The FBI seized the assets. The hackers exploited Colonial, JBS. They requested a ransom. A ransom was transferred. And then days, weeks later, the FBI seized those assets. They were able to do it quickly because Bitcoin is bad for crime. And I think that that is not intuitive to a lot of people, but it's a thing that the public is learning more and more as we continue to see cases like this.

- Hunter, I'm curious just to get your thoughts just on the fact that so many of these comp-- so many, a couple of these companies-- have paid these hackers what they were asking, or gave them a certain amount in order to get their operations back online and running again. What do you think this means, though, for future ransomware attacks? Are we going to-- could we potentially see more of them as a result?

HUNTER HORSLEY: Yeah, I mean, this is-- this is a great topic. It's one, as you guys know, Bitwise is the largest cryptocurrency index fund manager in the world. We work with financial advisors, investment professionals. And this topic frequently comes up, what is the role of crypto in crime, and what should we expect in the future.

What the data shows-- there's a recent report from Chainalysis, which is one of the analytic services that law enforcement uses, and what their data shows is that there's a downtrend in the use of Bitcoin and cryptocurrencies by cyber criminals in ransomware scenarios and others. In fact, last-- between 2019 and 2020, the occurrence of crypto used in those scenarios is down about 80%. So I think that criminals are getting smarter that crypto is a pretty poor tool for them. And with Colonial, we saw that in full force. Our clients, our investors, investment professionals I think are, over time, asking the right questions and learning that. So I do think the public is better understanding that Bitcoin is not good for crime, but it is counterintuitive to many.

- I would imagine that every business today, whether it's financial, whether it's industrial, if it's got a computer, it's got to have a protocol in place to protect itself. In your business, because I think you'd be prime-- you're managing assets for people-- what kind of safety protocols, without revealing them so that people can't hurt you, do you have to take to prevent this kind of crime?

HUNTER HORSLEY: I think, in the modern world, if you're running a corporation, this-- cybersecurity in your defense posture has to be one of your top priorities. We take it very seriously. Our CTO here, our chief technology officer, did software security in the military. And we employ the array of state-of-the-art procedures. We also, as a part of helping investment professionals access the crypto asset class, secure digital assets in the state-of-the-art, enterprise-grade custodial solutions that exist today. These are insured with redundancy, multiple signatures required to access the assets. So I think, in crypto and for crypto companies, cybersecurity is even more front and center than maybe some businesses like meatpacking businesses, where it's a little bit out of sight, out of mind. But for Bitwise, it's a top priority. And I think in the crypto space, for most of the credible players, it's something that a lot of investment goes into.

- And we asked this to Congressman Kevin Brady when he was with us yesterday, but I'm curious just to get your thoughts. Going beyond what companies themselves can do, what do you think-- or what should the government do to better prevent attacks like this from occurring again?

HUNTER HORSLEY: Well, I think that the government is increasingly doing the right things in the crypto space. I mean, again, if you just look at the example that we were discussing, the Colonial Pipeline, they apprehended-- they seized and froze the assets in a very short period of time. Last year, in August, there was-- the Department of Justice shared that they had seized several millions of dollars of cryptocurrency from terrorist organizations. So they're equipping themselves with the right tools, and then they're enforcing on bad actors. And we're seeing that play out in the data. We're seeing the use of crypto in illicit activities decreasing, even though cybersecurity incidents are increasing. So I think that regulators, law enforcement are effectively helping police this space. And I think, again, people are coming to understand that it's an easier space to police than maybe other avenues for hackers.

- The company is Bitwise Asset Management. Their CEO is Hunter Horsley. And we look forward to you coming back to continue this discussion. Not necessarily about cybercrime, but about Bitcoin, because it's of interest to so many people and a lot of money at stake.