- WSJ report claims Coinbase dabbled in cryptocurrencies to make extra cash
- The report further states that Coinbase used the company’s cash to trade and stake cryptocurrencies in a bid to make a profit.
According to a recent report by the Wall Street Journal, Coinbase’s risk solutions unit used the company’s cash to speculate on cryptocurrencies in an effort to generate additional revenue streams.
Report claims Coinbase used company money to trade cryptocurrencies
According to WSJ, Coinbase hired four Wall Street traders last year to launch a team called the Risk Solutions Unit, which focuses on generating profits for the company. The team allegedly used the company’s money to engage in cryptocurrency, which people familiar with the matter said was called “proprietary trading.”
The report further outlines how Coinbase’s Risk Solutions Unit was initially created for the purpose of trading cryptocurrencies on behalf of its clients while meeting conflict of interest mitigation tools and policies.
After trading through the company’s cash, the team then worked to develop refined financial mechanisms to facilitate transactions for the company. According to the report, the team used the company’s money to stake and trade in cryptocurrencies to make more money in the long run. Additionally, a test transaction of $100 million was also made by Coinbase, which qualified as a test trade offering using the newly formed mechanism.
Coinbase, on the other hand, issued several statements in response, stating that the company initially considered exploring proprietary trading, but later abandoned the idea. Coinbase spokeswoman Alesia Haas testified before Congress about the matter, adding that the company never considered pursuing trading on its own account.
“We do not engage in proprietary trading on our platform. Our statements to Congress accurately reflect our actual trading activities. Coinbase does not and has never had proprietary trading activity. Any insinuation that we have Misleading Congress is a deliberate misrepresentation of the facts,” the Coinbase spokesperson reiterated.
Additionally, a recent blog posted by the firm indicates that Coinbase has occasionally purchased cryptocurrency “like director, including for its corporate cash and operational purposes. However, the company does not consider these purchases to be proprietary transactions because “its goal is not for Coinbase to benefit from increases in the value of the cryptocurrency being traded.”
The rules prohibiting financial institutions such as banks from exploring speculative activities were originally imposed in 2010. These rules were created to prevent financial organizations from engaging in speculative activities given its volatile nature and dynamic steep market.
Regulators are of the view that institutions that engage in speculative crypto activities could lead to multiple risks and possible conflict of interest that could end up harming investors and consumers in the long run.