Coinbase used company’s cash to trade cryptocurrencies: WSJ

A report by the Wall Street Journal asserts that the exchange hired at least four experienced traders to complete a $100 million transaction as a test of its proprietary trading business.

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Coinbase, the world’s second-largest cryptocurrency exchange by volume, reportedly hired four Wall Street traders to its newly formed division dubbed Coinbase Risk Solutions Unit to use its own cash to trade and stake cryptocurrencies. As digital assets’ prices plummeted, Coinbase may have turned to trading on its platform to generate additional streams of revenue — and some employees used to describe the activity as “proprietary trading.”

Proprietary trading refers to a financial institution that invests its own money on exchange for direct market gain versus earning thin-margined commissions by trading on behalf of customers. Such activity involves multiple risks and can create potential conflicts of interest such as market manipulation and insider trading.

Coinbase, however, dismissed WSJ claims, arguing that journalists confused "client-driven activities" with proprietary trading. Five months after the Risk Solutions Unit was reportedly created, the company’s CFO Alesia Haas testified before Congress that “we do not engage in proprietary trading on our platform.”

“Our statements to Congress accurately reflect our actual business activities. Coinbase does not, and has never had a proprietary trading business. Any insinuation that we misled Congress is a willful misrepresentation of the facts,” Haas reiterated.

In a recent blog post, Coinbase explained that it has purchased crypto from time to time “as principal, including for its corporate treasury and operational purposes. The company explained that their activity shouldn’t be viewed as proprietary trading because “its purpose is not for Coinbase to benefit from increases in the value of the cryptocurrency being traded.”