The $320 million hack of the Bitcoin-linked Liquid Network is another dent to crypto’s reputation as the industry tries to convince banks and institutional investors that digital assets can become part of mainstream financial infrastructure.

The damage extends beyond the Bitcoin that was taken. Liquid was built to make the largest cryptocurrency more useful for trading and settlement, and the incident highlights the risks in the layers surrounding a blockchain — the wallets, custody arrangements and transaction infrastructure that users ultimately have to rely on.

“Continued exploits reinforce to global fintechs and institutions that decentralised finance is still not ready for prime time,” said…