The Information's TITV
00:38:31 · Nikhil Raghuveera
[00:38:31] S4: Yeah. So to your first question around them executing a freeze, this is something that Circle has oftentimes been hesitant to go and take direct action without a court order. And the reason for that is the legal exposure. Right? So if the Clarity Act had passed, within the Clarity Act, there was actually a provision that provided a safe harbor for issuers to be able to execute some of this without concerns around potential legal implications. Circle, as a result, clarity didn't pass, and so Circle, as a result, doesn't usually execute any type of freeze unless there is an explicit court order. As you can imagine, court orders can take time. They're not responsive enough. They don't move fast enough in in the case of a major exploit. In this case, it looks like... I would imagine, and I can speculate here a little bit, it would be that Circle felt comfortable enough and confident enough that by executing a freeze here was directly related to North Korea, and so they don't face the same type of legal exposure of an incorrect freeze. Tether operates outside of The United States, and so they have slightly different approach and... Because of their jurisdictional requirements. So, yeah, that freeze speed is really fast. And usually how it's done is you need information on it, then you have to go and oftentimes an issuer has to go to their operations team and their engineering team to go and execute that for you. So there is a full process that happens here. It's usually not something that is quickly done while it can be done faster. And then, yeah, now on the question on what to do with those frozen funds, I think we'll have to see. We've actually never seen us... An instance this large, and so it'll be likely working across law enforcement with exchange, with regulators to kind of navigate that process. So we'll have to actually see how they how they go about it. And I think even a lot of the... Some of the crypto protocols that have also frozen are gonna have to navigate the same question too.
00:40:12 · Akash Pasricha, Yueqi Yang
[00:40:12] S0: Yueqi, I I haven't looked at the markets broadly, but how are the crypto markets responding? Is this a major sell off event right now? [00:40:21] S5: The major tokens, Bitcoin, Ease, Solana, BNB token included, all dropped after the hack. I think Bitcoin now is trading around $77,000 Earlier, a few days ago, it was trading at above $80,000 So it is a drop, but not by too much. I think the market is currently, broadly speaking, relatively confident that Binance as the biggest crypto exchange is able to weather this storm just because of how much money the company has already made. And CZ, which is the co founder of Binance, former CEO, largest shareholder of Binance, he has been putting out tweets basically saying that they are able to pay customers back. And that's because the hack amount was about $6,000,000,000 and then about half of them had already been frozen. So that reduced their exposure to around $3,000,000,000 And they currently have a $1,000,000,000 emergency reserve fund that they can tap into to make up for this gap. And then for the rest of the money, which is around $2,000,000,000 gap, they believe that they can use their own company fund to pay customers back. And of course, the exchange right now has halted withdrawal. They promised that they're hoping to reopen withdrawal in about forty eight hours from this morning. And so we'll need to see what the outflow will look like once the exchange resume processing withdrawal and whether there will be a wrong on the bank situation where customers are rushing to pull their assets off the exchange.
00:40:21 · Yueqi Yang, Akash Pasricha, Nikhil Raghuveera
[00:40:21] S5: The major tokens, Bitcoin, Ease, Solana, BNB token included, all dropped after the hack. I think Bitcoin now is trading around $77,000 Earlier, a few days ago, it was trading at above $80,000 So it is a drop, but not by too much. I think the market is currently, broadly speaking, relatively confident that Binance as the biggest crypto exchange is able to weather this storm just because of how much money the company has already made. And CZ, which is the co founder of Binance, former CEO, largest shareholder of Binance, he has been putting out tweets basically saying that they are able to pay customers back. And that's because the hack amount was about $6,000,000,000 and then about half of them had already been frozen. So that reduced their exposure to around $3,000,000,000 And they currently have a $1,000,000,000 emergency reserve fund that they can tap into to make up for this gap. And then for the rest of the money, which is around $2,000,000,000 gap, they believe that they can use their own company fund to pay customers back. And of course, the exchange right now has halted withdrawal. They promised that they're hoping to reopen withdrawal in about forty eight hours from this morning. And so we'll need to see what the outflow will look like once the exchange resume processing withdrawal and whether there will be a wrong on the bank situation where customers are rushing to pull their assets off the exchange. [00:42:05] S0: Nikhil, do you think that that happens? [00:42:11] S4: I think it will happen. I think... Wait. Sorry. My my mind is
00:42:11 · Nikhil Raghuveera, Akash Pasricha
[00:42:11] S4: I think it will happen. I think... Wait. Sorry. My my mind is [00:42:14] S0: The the raw... I mean, I'm I'm saying when when withdrawals open. Yeah. Is this gonna be a a run on the bank situation? [00:42:21] S4: I see. I don't think it's gonna be a run on the banks. I think exactly what Yueqi was saying. I think the industry has, I think, a good bit of confidence on the operations of Binance. I think they have been around for a while. They do have a lot of capital. I think the the more important question that will... And from a longer term perspective, again, is there's just been a lot of exploits and hacks. And so there's going to be... There's kind of this perpetual concern and challenge around if an organization is planning to deploy or launch a digital asset product, how do you ensure security? How do you have protection around that? And that's really the bigger problem. Right? It's not so much a draw out of capital right now or people saying, wait. This... Like, I need to move my money out. It's more so the scaling of the industry and the deployment of new assets. What are the concerns there? And when you see an exploit like this, if you're a larger financial institution, you might pause or you might take a moment to say, wait. We don't need... We shouldn't rush this. We need to make sure everything is really, really secure. So I think that's really the part that we'll have to navigate.
00:42:21 · Nikhil Raghuveera, Akash Pasricha
[00:42:21] S4: I see. I don't think it's gonna be a run on the banks. I think exactly what Yueqi was saying. I think the industry has, I think, a good bit of confidence on the operations of Binance. I think they have been around for a while. They do have a lot of capital. I think the the more important question that will... And from a longer term perspective, again, is there's just been a lot of exploits and hacks. And so there's going to be... There's kind of this perpetual concern and challenge around if an organization is planning to deploy or launch a digital asset product, how do you ensure security? How do you have protection around that? And that's really the bigger problem. Right? It's not so much a draw out of capital right now or people saying, wait. This... Like, I need to move my money out. It's more so the scaling of the industry and the deployment of new assets. What are the concerns there? And when you see an exploit like this, if you're a larger financial institution, you might pause or you might take a moment to say, wait. We don't need... We shouldn't rush this. We need to make sure everything is really, really secure. So I think that's really the part that we'll have to navigate. [00:43:16] S0: And you actually... Don't mean this in, like, a cheeky cheeky way, but, like, was AI a part of this potentially? We've heard about all these AI aided hacks. Can we assume that that made this all easier for the attackers?
00:43:16 · Akash Pasricha, Yueqi Yang
[00:43:16] S0: And you actually... Don't mean this in, like, a cheeky cheeky way, but, like, was AI a part of this potentially? We've heard about all these AI aided hacks. Can we assume that that made this all easier for the attackers? [00:43:34] S5: We don't know yet. And I think AI is definitely a major concern for a lot of crypto companies just because of how powerful they are, how quickly they're able to detect any vulnerabilities in your coding. But from the initial assessment that Binance put out, it seems like engineers laptop was compromised. We don't know whether that's social engineering or not. A lot of the hacks that happened earlier this year with other exchanges, it seems like oftentimes is some kind of operational security vulnerability. It may not even require AI, and it could be someone just not being careful enough, and there's not enough check and balances set up. So we'll wait to see what Binance comes out with their final assessment.