Larry Summers Optimistic About Bitcoin Amid Huge Thefts
In an interview with Politico, former Treasury Secretary Larry Summers gave an optimistic view of Bitcoin, the digital currency that Paul Krugman has unequivocally labeled "evil."
In an interview with Politico, former Treasury Secretary Larry Summers gave an optimistic view of Bitcoin, the digital currency that Paul Krugman has unequivocally labeled "evil." Bitcoin has been plagued in recent days by the revelation that the largest trading site, Mt. Gox, was possibly the target of a $350 million theft.
"I think Bitcoin has the potential to be a very, very important development," Summers said. He continued,
I think that we are seeing many, many sectors of our economy be transformed by information technology and certainly it seems bizarre that at this late date, one has to pay as much as one does to use a debit card or to get cash from an ATM or to transfer money to one's child living abroad. So it seems to me that there's going to be a concerted effort to reduce financial frictions and that effort's going to be multi-faceted and certainly Bitcoin is an innovative approach in that regard.
Innovative, yes, but not without its security flaws. In addition to the Mt. Gox threat, Bitcoin has also been recently targeted by the "Pony" botnet virus. Reuters' Jim Finkle reports that according to security firm Trustwave, cyber criminals have infected hundreds of thousands of computers with Pony. Those criminals, who remain unknown, have already stolen at least 85 virtual wallets containing Bitcoin.
Trustwave speculates that digital currency theft is likely to grow. The Mt. Gox theft was huge — hackers possibly stole 6 percent of all Bitcoin in circulation, in an infiltration that went unnoticed by the Mt. Gox for years.
Summers still is unwilling to dismiss the digital currency. "I am very mindful that there have been other things that came out of Silicon Valley that seemed very flakey to people on the outside and then proved to be an enormous deal. Very serious economists thought that the Internet was going to be no more important than the fax machine so I'm not willing to dismiss Bitcoin," he said.
Meanwhile, executives from other Bitcoin trading sites have released a joint statement in an attempt to reassure customers. The second annual Bitcoin Foundation conference, which many of those executives will attend, is scheduled to occur in Amsterdam in May.