Phemex CEO Federico Variola said artificial intelligence has been a "net negative" for the crypto industry, despite his exchange announcing an AI-focused transformation earlier this year.
Speaking on Cointelegraph's Chain Reaction podcast, Variola said AI has diverted capital away from the sector while simultaneously empowering attackers and driving up cybersecurity costs — pressures that risk pushing crypto toward greater centralization.
"It's difficult to be bullish about AI in crypto," he said. "Liquidity has been significantly diverted to that industry on one side. On the other hand, AI has empowered a lot of bad actors that have been exploiting protocols."
Variola's remarks come after Phemex outlined plans in February to embed AI across product development and internal operations. His latest comments targeted the broader industry impact rather than his company's strategy.
The concern is underscored by a July exploit in which attackers drained roughly $116 million in Bitcoin from more than 5,200 addresses affected by a flaw in Coldcard hardware wallets — a vulnerability widely believed to have been discovered through AI-assisted code analysis. Coinkite CEO Rodolfo Novak warned developers at the time that AI-assisted code review could now uncover bugs faster than 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," Variola said, adding that small protocol teams would no longer be able to operate without significant cybersecurity budgets.
He also cautioned that rising AI-driven threats could make self-custody and decentralized finance less appealing to retail users.
"As AI becomes more pervasive — whether it's your devices being hacked, social engineering, or all these kinds of strategies 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," he said.
Security firms have highlighted AI's defensive potential even as attacks grow more sophisticated. CertiK senior blockchain investigator Natalie Newson told Cointelegraph in April that AI "can also be one of the biggest defenses."
Despite his overall assessment, Variola said he sees practical applications for AI agents, particularly in helping investors build portfolios and improve trading decisions. However, he did not expect them to fully replace human judgment.
"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," he said.
