64-year-old investment bank says Wall Street is losing crypto confidence

A weekend crypto heist has sent ripples well beyond decentralized finance.

64-year-old investment bank Jefferies LLC is warning that Wall Street's growing embrace of blockchain technology could hit pause due to the heist, Bloomberg reported on April 21.

The attack, which drained nearly $293 million from KelpDao and triggered a $10 billion bank run on Aave, one of the largest decentralized lending platforms, was reportedly carried out by North Korean hackers. 

It is the biggest DeFi breach of the year, coming just weeks after a separate North Korea-linked attack stole over $270 million from Drift, a trading platform built on the Solana (SOL) blockchain.

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BlackRock, Franklin Templeton and the tokenization boom at stake

Andrew Moss, Senior Vice President for Digital Assets and Equity Research at Jefferies, said the fallout is unlikely to bleed into conventional markets, but the damage to confidence could be lasting.

"The potential loss of trust poses both near- and longer-term risks regardless of who is to blame," Moss wrote in a Tuesday report. "Although we don't expect TradFi firms to throw in the crypto towel, the rollout or expansion of tokenization initiatives across banks, asset managers, fintechs and payments may decelerate temporarily."

The timing is particularly uncomfortable for Wall Street. 

Firms including BlackRock, Franklin Templeton and others have spent the past year building products on blockchain rails, betting the technology has matured enough to handle traditional capital. 

Moss acknowledged that the tokenized products rolled out so far largely sit on single blockchains and were not directly exposed to the exploited infrastructure. 

But as tokenization expands, he warned, those products will increasingly depend on the same kind of cross-chain software that was targeted this weekend, making the vulnerability impossible to ignore.

"Although we don’t expect TradFi firms to throw in the crypto towel, the rollout or expansion of tokenization initiatives across banks, asset managers, fintechs and payments may decelerate temporarily," Moss added. 

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Blockchain needs time to grow

The attack exploited the systems that move assets between different blockchains, known as bridges, precisely the infrastructure that underpins the next phase of institutional crypto adoption. 

Hackers deposited the stolen tokens as collateral across multiple platforms, leaving investors unable to unwind leveraged positions.

"Investors are likely unable to unwind and close leveraged positions as a result, which could lead to heightened risk of liquidations as borrowing rates rise and carry turns negative," Moss warned.

For an industry that has spent the past year convincing Wall Street it has grown up, Jefferies pointed out that the "nascent" digital asset sector "still requires time to mature."

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