Litecoin Hit by Hoax That Underscores Crypto Vulnerability

On Monday, a huge announcement between Walmart and Litecoin made waves in the world of cryptocurrency. The news that Walmart was partnering with the crypto standard saw Litecoin’s price shooting up at the start of the week, setting the day up to be a huge winner for crypto.

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The news was announced via a press release on GlobeNewswire, a major news site that shares press releases as soon as they become breaking news. The notice indicated that Litecoin and Walmart were partnering so that Walmart shoppers could spend the cryptocurrency on goods in-store and online. The notice also claimed that Walmart was partnering with the Litecoin Foundation, a nonprofit organization that promotes the use of the crypto standard.

The news was a huge win for Litecoin, which shot up in value by 26 percent early in the day Monday. It also represented a major win for crypto, as other standards like Bitcoin have been in a downward spiral for nearly a week.

But there was just one problem: None of it was true.

Fake Press Release

The press release turned out to be a hoax.

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“Walmart was the subject of a fake news release issued on Monday, Sept. 13, that falsely stated Walmart announced a partnership with Litecoin (LTC),” Walmart explained in a clarifying press release later in the day on Monday. “Walmart had no knowledge of the press release issued by GlobeNewswire, and it is incorrect. Walmart has no relationship with Litecoin.”

GlobeNewswire, for its own part, said that it was going to implement new processes to authenticate press releases before they go live in the future. A spokesperson for the organization stated, “We will work with the appropriate authorities to request – and facilitate – a full investigation, including into any criminal activity associated with this matter.”

When news broke that the whole thing was a hoax, Litecoin’s price dropped like a stone right back to where it started on Monday before the hoax kicked off.

Why Would Someone Do This?

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It’s not hard to see why someone might artificially inflate the value of a cryptocurrency with a fake news release. A malicious investor who had bought in on Litecoin probably wanted to offload their investment at a high rate of return. The best way to ensure that the coin will jump in value is to fabricate a story that acts as fuel for a rally.

As such, the person or people responsible for this hoax likely sold out of Litecoin at an inflated price, leaving unsuspecting investors holding assets that were significantly overvalued. Doing this is extremely illegal, make no mistake: These actions would constitute fraud on several levels and could result in jail time if prosecutors were able to prove who was responsible.

However, one of the chief vulnerabilities of cryptocurrency is that it’s largely anonymous. The online-only nature of the standard means that it’s completely possible to make untraceable transactions with crypto. This isn’t even a bug: it’s a feature of cryptocurrency. Proponents of the standard argue that it’s ideal to duck under central regulators so that no one is looking over their shoulder when they make transactions.

Fraud, Crime, and Destabilization

Some analysts feel as though cryptocurrencies are a window to a destabilizing economic element that is best suited to criminals and fraudsters. Since it’s nearly impossible to trace cryptocurrency transactions, and since cryptocurrency itself is anonymous, it’s an extremely popular currency for use on the international black market.

Cryptocurrency has become the preferred method of payment for illicit substances, weaponry, and even reimbursement for things like human trafficking or payment for criminal activity. This is extremely concerning for regulators, as one of the strengths of the international financial system is that it makes organized crime extremely difficult to orchestrate across borders.

Cryptocurrency has provided an excellent solution to this problem.

Regulators vs Cryptocurrency

In the US, regulations are coming for cryptocurrency in a swift manner. The Fed is less than pleased about the presence of “stable coins,” crypto assets that are pinned to things like corporate debt or even the US dollar. Rumor has it that the US’s central bank wants to create its own stable coin and that regulations on the standard will have to come before the Fed dips its toe into that pool.

The SEC, according to chairman Gary Gensler, is looking closely at cryptocurrency as a whole and considering some sweeping changes to how the standard is treated by financial law. One of the biggest changes that could be coming soon for crypto is the application of a capital gains tax to earnings from trading crypto.

This would essentially make cryptocurrency a security exchange and could push people into investing in crypto futures instead of the actual coins themselves. No matter what the future holds for crypto, it’s almost certain that it’s heading for a huge wall of regulations to address regulator uncertainty.

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