December 2, 2022

Coinbase Denies Operating a Proprietary Trading Business or Acting as a Market Maker

2 min read
Coinbase Denies Operating a Proprietary Trading Business or Acting as a Market Maker

On Thursday (September 22), crypto exchange Coinbase responded to allegations made by a Wall Street Journal (WSJ) report that was published on the same day.

The WSJ report stated:

Coinbase Global Inc. has been searching for new ways to make money. One business it flirted with was controversial: using its own money to speculate on cryptocurrencies.

Last year, Coinbase—which operates a large cryptocurrency exchange that handles bitcoin and other digital coins—hired at least four senior Wall Street traders and launched a group to generate profit, in part, by using the company’s cash to trade and ‘stake,’ or lock up, cryptocurrencies, according to people close to the matter. The activity was described as ‘proprietary’ trading by the people at the company.




In a blog post published on September 22, Coinbase said:

Unlike many of our competitors, Coinbase does not operate a proprietary trading business or act as a market maker. In fact, one of the competitive strengths of our Institutional Prime platform is our agency only trading model, where we act only on behalf of our clients. As a result, our incentives and our clients’ incentives are aligned by design.

Coinbase does, from time to time, purchase cryptocurrency as principal, including for our corporate treasury and operational purposes*. 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.

It went on to say:

As more institutions have become interested in investing in crypto, we are rolling out new solutions to help. One way we intend to serve our institutional clients is through a small newly formed team called Coinbase Risk Solutions (CRS)… In doing this, 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. We have tools and policies in place that mirror best practices in the financial services industry and are designed to manage conflicts of interest.

https://www.cryptoglobe.com/latest/2022/09/coinbase-denies-operating-a-proprietary-trading-business-or-acting-as-a-market-maker/

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