Coinbase denies making controversial financial maneuver and attacks competing exchanges
Cryptocurrency exchange Coinbase is vehemently denying that it has engaged in so-called proprietary trading – but claims that some of its competitors are doing so.
Exchange
Is accused of proprietary trading, a practice that could go against regulations passed after the 2008 banking crisis
Proprietary trading occurs when an investment broker creates a desk or department to trade assets in the market directly. The company's remuneration also comes from these assets and no longer just from fees left over from the negotiations made by customers.
A Wall Street Journal report published on Thursday (22) alleges that Coinbase has hired traders to use the company’s own funds to trade and bet on cryptocurrencies, with the aim of making a profit. According to the report, $100 million was used in such a deal.
Coinbase
In response, Coinbase quickly wrote a company blog post denying the allegations, arguing that the report confused “customer-oriented activities” with proprietary trading.
Unlike many of our competitors, Coinbase does not operate a proprietary trading business or act as a market maker,” the company wrote, without specifying which rival exchanges it believes practice the practice.
Why proprietary trading is controversial
Considering concerns about the impact of this type of practice on the US economy in the past, it is not surprising that Coinbase is taking these allegations seriously.
Proprietary trading is controversial because it arguably contributed to the 2008 financial crisis. The practice could conflict with the so-called Volcker Rule, a regulation passed in 2010 in the wake of the financial crisis to prevent banks from making speculative investments like bonds. , commodity futures or derivatives trading.
The US central bank, called the Federal Reserve, passed the Volcker Rule as part of a reform package called the Dodd-Frank, which was designed to reform the US financial system to prevent future crises.
While some believe proprietary trading by financial institutions is dangerous, others have their doubts. Despite approving its eponymous rule, White House economics adviser Paul Volcker himself has long said that he believes the practice “was there but not central” to the 2008 crisis.
But since Coinbase works as a digital currency exchange, the Volcker Rule may apply.
Accusations against Coinbase
This is far from the first allegation that Coinbase and its team have faced in recent months. Last week, the brother of a former Coinbase product manager pleaded guilty to charges of conspiracy to commit wire fraud in connection with an alleged cryptocurrency insider trading scheme involving the exchange’s listing advertisements.
And last month, a U.S. Congressional subcommittee asked Coinbase, along with several other cryptocurrency exchanges, for “all documents” regarding how each investigates and handles fraud, alleging that the exchanges have not taken sufficient steps to prevent activities. illegally on their platforms. .
Coinbase Launches Tool That “Traces” Crypto-Friendly Politicians
Program launches shortly before the November US legislative elections and at a time when the crypto industry is under government pressure
Users of exchange Coinbase will be able to see which U.S. politicians are “crypto friends” with a new tool in the exchange’s app, CEO Brian Armstrong announced Wednesday night on Twitter, amid a time when Cryptocurrency companies ramp up their lobbying efforts ahead of the country’s legislative elections in November.
Ratings are based in part on data from the Crypto Action Network, which ranks members of Congress on publicly available data.
such as statements to the media, legislative records and their willingness to accept donations from
The Crypto Action Network is an organization dedicated to promoting the growth and security of cryptocurrencies.
Crypto sector ramps up its lobbying efforts
With legislative elections approaching in November, cryptocurrency exchanges including Coinbase and FTX have recently ramped up their political efforts, including hiring lobbyists and former regulators to influence policymakers in passing favorable legislation.
Armstrong also added that candidates will be able to receive cryptocurrency donations through the new platform.
Going forward, Coinbase plans to include information about candidates running for office (in addition to elected officials) as well as information about politicians in other countries.
The move comes as the cryptocurrency industry grapples with increased scrutiny from regulators.
Armstrong announced last week that Coinbase will support a lawsuit filed against the Treasury, following the department’s decision in August to blacklist the privacy protocol Tornado Cash on charges of money laundering.
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