Federico Variola, CEO of crypto exchange Phemex, has characterized artificial intelligence as a 'net negative' for the cryptocurrency industry, despite his own platform announcing an AI-focused transformation earlier this year.
Speaking on Cointelegraph's Chain Reaction podcast, Variola outlined concerns about AI's broad impact on crypto markets and security. He said the technology has redirected liquidity away from the industry while simultaneously empowering malicious actors and driving up cybersecurity costs for smaller teams.
Capital Diversion and Security Threats
Variola expressed skepticism about AI's potential benefits for crypto specifically, noting that "liquidity have been significantly diverted" to AI sectors. He also emphasized that AI has "empowered a lot of bad actors that have been exploiting protocols."
The CEO warned that AI-powered threats could reshape how users approach cryptocurrency holdings. "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," he said.
Real-World Crypto Exploits
Variola's concerns align with recent security incidents. In July, attackers drained approximately $116 million in Bitcoin from more than 5,200 addresses affected by a Coldcard hardware wallet vulnerability that security experts believe was discovered through malicious use of AI.
Rodolfo Novak, CEO of Coinkite, warned at the time that AI-assisted code review can now identify bugs faster than seasoned industry experts can address them. Variola echoed this assessment, noting that protocol teams without substantial cybersecurity budgets face heightened risks.
Centralization Concerns
A key concern for Variola is that AI-driven security fixes tend to encourage centralization rather than decentralization. "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," he stated.
Potential Use Cases
Despite his broader skepticism, Variola identified limited practical applications for AI in crypto. He noted potential benefits from AI agents that help investors build portfolios or make trading decisions. However, he emphasized that such tools should support rather than replace human judgment: "At the end of the day, still it will be up to the user to make the final decision."
Security researchers have acknowledged that AI presents both offensive and defensive capabilities. CertiK senior blockchain investigator Natalie Newson stated in April that "AI can also be one of the biggest defenses," though she cautioned that the technology is simultaneously making attacks more sophisticated.
