Coinbase Refutes Claims It Tested Proprietary Trading

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  • Wall Street Jour­nal arti­cle seems to con­fuse “client-dri­ven activ­i­ties” with pro­pri­etary trad­ing, Coin­base said in a blog post
  • Cryp­to exchange says it buys cryp­to “from time to time” for cor­po­rate trea­sury and oper­a­tional purposes

Coin­base refut­ed reports that it ran a pro­pri­etary trad­ing busi­ness, assert­ing that its risk solu­tions team seeks to expand insti­tu­tion­al cryp­to par­tic­i­pa­tion beyond just hold­ing assets. 

The Wall Street Jour­nal report­ed Thurs­day that Coin­base launched a group last year that sought to use com­pa­ny cash to trade and stake cryp­to in an effort to gen­er­ate prof­its. The pub­li­ca­tion, which cit­ed “peo­ple close to the mat­ter,” report­ed that the cryp­to exchange hired at least four senior Wall Street traders for the unit.

The group com­plet­ed a $100 mil­lion trans­ac­tion ear­li­er this year that it viewed as a test trade, but ulti­mate­ly decid­ed against pur­su­ing pro­pri­etary trad­ing, accord­ing to the Wall Street Journal.

Coin­base does not oper­ate a pro­pri­etary trad­ing busi­ness or act as a mar­ket mak­er, the cryp­to exchange said in a Thurs­day blog post, adding that the arti­cle seems to con­fuse “client-dri­ven activ­i­ties” with pro­pri­etary trading.

Pro­pri­etary trad­ing is when a bank or oth­er insti­tu­tion trades stocks, bonds or oth­er finan­cial instru­ments in its own account — using its own cap­i­tal rather than clients’ money.

“Coin­base does, from time to time, pur­chase cryp­tocur­ren­cy as prin­ci­pal, includ­ing for our cor­po­rate trea­sury and oper­a­tional pur­pos­es,” the com­pa­ny wrote.

“We do not view this as pro­pri­etary trad­ing because its pur­pose is not for Coin­base to ben­e­fit from short-term increas­es in val­ue of the cryp­tocur­ren­cy being trad­ed,” the blog post said.

Coin­base cur­rent­ly holds about 4,500 bit­coins, accord­ing to Bit­coin­Trea­suries

A spokesper­son declined to com­ment beyond the blog post.

Coin­base formed a risk solu­tions team as it attempts to help insti­tu­tion­al investors par­tic­i­pate in Web3 beyond hold­ing cryp­toas­sets, the com­pa­ny added in the blog.

“We are fol­low­ing a well trod­den path on Wall Street where finan­cial ser­vices firms pro­vide clients mul­ti­ple ways to get expo­sure to new asset class­es and man­age cer­tain risks,” Coin­base wrote. “We have tools and poli­cies in place that mir­ror best prac­tices in the finan­cial ser­vices indus­try and are designed to man­age con­flicts of interest.”

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  • Ben Strack
    Ben Strack is a Den­ver-based reporter cov­er­ing macro and cryp­to-native funds, finan­cial advi­sors, struc­tured prod­ucts, and the inte­gra­tion of dig­i­tal assets and decen­tral­ized finance (DeFi) into tra­di­tion­al finance. Pri­or to join­ing Block­works, he cov­ered the asset man­age­ment indus­try for Fund Intel­li­gence and was a reporter and edi­tor for var­i­ous local news­pa­pers on Long Island. He grad­u­at­ed from the Uni­ver­si­ty of Mary­land with a degree in journalism.

    Con­tact Ben via email at [email pro­tect­ed]

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