Walmart shares rose less than 1% when the fake press release hit the wire. Litecoin, however, soared as much as 33%. For the scam to pay off, the perpetrators would likely have had to bet on Litecoin or another cryptocurrency, some of which rose in sympathy. So to sum, digital currencies aren’t yet a practical method of payment for toilet paper, cereal or other household items that you might purchase at Walmart. But they can be a useful tool for criminals.
Cryptocurrencies remain something of a Wild West in financial markets. The lack of centralized, coordinated regulation is one of the theoretical selling points but this also makes the market particularly prone to wild price swings, and it makes fraudulent activity significantly more difficult to trace than similar schemes in established financial securities. The Securities and Exchange Commission as well as key lawmakers have been increasingly calling for greater oversight of cryptocurrencies. The Walmart incident just gave them one more reason.
Major financial news organizations including CNBC, Bloomberg News and Reuters published headlines on the alleged Walmart-Litecoin partnership within minutes of the fraudulent press release hitting the wires. This is a black eye for the media and a lesson for everyone to be more vigilant when it comes to digital currencies. In hindsight, there were some obvious giveaways in the press release. Litecoin would be an odd choice for a major retailer, for starters. Created in 2011, it lacks the liquidity and technical foundations of some of its better-known peers. According to CoinMarketCap, Litecoin has only $12 billion worth of coins in circulation, making it the 15th-largest cryptocurrency. For comparison, market-leader Bitcoin has about $800 billion in total market value.
But on the other hand, these news organizations aren’t staffed by neophytes. There had to have been at least a nugget of plausibility to the idea that a major retailer might start accepting cryptocurrency as payments for journalists to be willing to hit the send button. For example, I don’t think a false press release announcing Walmart was buying Amazon.com Inc. — a company more than four times its size in market value — would have gotten quite the same buy-in or caused the same shockwaves .
Indeed, Walmart has expressed some interest in cryptocurrencies; just last month, the company posted a job listing seeking an expert to develop a blockchain strategy. Amazon has said it’s exploring what the use of cryptocurrencies would look like for shoppers on its sprawling e-commerce empire, without any immediate or specific plans to accept the digital alternatives as payment. Tesla Inc. briefly planned to accept Bitcoin as payment for its cars but then reversed course, citing concerns about the impact mining for digital currencies has on the environment.
Digital currencies have a very long way to go before they become a part of daily life. Apart from the corruption and fraud concerns, it’s far from clear that crypto will ever shake its Monopoly Money image and see mass adoption. El Salvador broke new ground by launching Bitcoin as legal tender in the country but the debut was marred by technical glitches, public demonstrations and concerns about oversight for bad actors in a country with a history of graft, as Bloomberg Opinion’s Lionel Laurent and Aaron Brown have documented.
Like it or not, though, crypto — and all that it brings with it — is here and it’s not going away anytime soon. Buyer, and reader, beware.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Brooke Sutherland is a Bloomberg Opinion columnist covering deals and industrial companies. She previously wrote an M&A column for Bloomberg News.
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