AI Has Been a ‘Net Negative’ for Crypto: Phemex CEO

Phemex CEO Federico Variola says AI has been a ‘net negative’ for crypto, despite the crypto exchange announcing an AI-focused transformation earlier this year. 

Speaking on Cointelegraph’s Chain Reaction, Variola said AI has diverted capital away from the industry, while empowering attackers and driving up cybersecurity costs for smaller teams — pressures that risk pushing crypto toward greater centralization. 

“It’s difficult to be bullish about AI in crypto,” he said. “Liquidity have been significantly diverted to to that industry on one side. On the other hand, AI has empowered a lot of bad actors that have been exploiting protocols.”

“It’s difficult to envision a world in which AI is going to favor crypto specifically as an industry, since a lot of the fixes that we see actually encourage more centralization rather than less centralization.”

Variola’s assessment offers a skeptical view of AI’s impact on crypto. It also comes after his crypto exchange announced an AI transformation in February, when he outlined plans to embed the technology across product development and internal operations, though his latest views focused on the broader crypto industry. 

AI raises stakes for crypto security

Variola’s take also comes as AI has been linked to recent crypto exploits. 

In July, attackers drained roughly $116 million in Bitcoin from more than 5,200 addresses affected by a Coldcard hardware wallet flaw that is widely believed to have been discovered through the malicious use of AI. 

Coinkite CEO Rodolfo Novak warned developers at the time that the “sober reality” is that AI-assisted code review can now uncover bugs that outpace the industry’s most seasoned experts. 

“AI has empowered a lot of bad actors that have been exploiting protocols, whether with social engineering or… finding vulnerabilities,” said Variola, adding that small teams working on protocols will no longer operate without a massive cybersecurity budget. 

He also warned that the AI threats could make self-custody and decentralized finance less appealing. 

“As AI becomes more pervasive, and whether it is your devices being hacked or social engineering, or all these kinds of strategies that are empowering threat actors, that makes DeFi a lot less appealing for a retail user because you have to worry about so many things that you didn’t have as much before.”

On the other hand, security experts have also highlighted AI’s defensive potential. CertiK senior blockchain investigator Natalie Newson told Cointelegraph in April that “AI can also be one of the biggest defenses,” even as she warned that the technology was making attacks more sophisticated.

Despite his assessment of AI’s overall impact, Variola said he sees practical benefits with AI agents, specifically to help investors build a portfolio or help them make better trading decisions. However, Variola said he did not expect AI agents to fully replace human trading decisions. 

“At the end of the day, still it will be up to the user to make the final decision. So I don’t think that agents will ever replace that action of taking the trade.” 

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