Coinbase Rejects Claims of Monopolistic Trading and Claims of a “Market Maker” for Cryptocurrency

Coinbase vociferously denies that it engages in private trading – but maintains that some of its competitors do.

a The Wall Street Journal Report The post on Thursday alleges that Coinbase has hired traders to use the company’s own funds to conduct trades and stake cryptocurrency with the goal of making a profit. According to the report, $100 million of Coinbase funds were used in a test trade that an undisclosed number of Coinbase employees are said to have dubbed “proprietary.”

In response, Coinbase quickly wrote a blog Mail Deny the allegations, arguing that the report confuses “client-led activities” with propaganda trading.

“Unlike many of our competitors, Coinbase does not operate a proprietary business or act as a market maker,” the company wrote, without specifying which competing exchanges it believes are involved in the practice.

“In fact, one of the competitive strengths of our enterprise president The platform is only our agency’s trading model, as we only act on behalf of our clients,” added Coinbase.

While describing herself web 3 The company denies prop trading allegations, and it sometimes buys crypto for the company’s treasury and operations, according to the blog post.

“We do not consider this to be private trading as it is not intended for Coinbase to benefit from short-term increases in the value of the cryptocurrency being traded,” Coinbase wrote.

Given the concerns about the impact of support trading on the US economy in the past, it is not surprising that Coinbase is taking these allegations seriously.

Prop trading is controversial because it contributed to the 2008 financial crisis. Prop trading, shown in The Wall Street Journal The report, however, would conflict with the Volcker Rule, a regulation approved in 2010 in the wake of the financial crisis to prevent banks from making speculative investments such as securities, commodity futures or derivatives trading.

The Federal Reserve approved the Volcker rule as part of Dodd-Frank Wall Street Reform and Consumer Protection Act, which was designed to reform the US financial system to prevent future crises.

While some believe that prop trading by financial institutions is dangerous, others have their skepticism. Despite agreeing to the rule of the same name, longtime White House economics adviser Paul Volcker said he believed the stent trade “was there but not central” to the 2008 crisis.

But since Coinbase acts as a digital currency exchange, the Volcker rule can be applied.

This is a far cry from the first claim that Coinbase and its employees have faced in recent months. Last week, the brother of a former product manager at Coinbase Admission of guilt Charged with conspiracy to commit wire fraud in connection with an alleged crypto insider trading scheme involving Coinbase listing ads.

Last month, a US Congressional subcommittee asked Coinbase, along with a number of other cryptocurrency exchanges, to “All documentsRelated to how the fraud was investigated and dealt with, claiming that the exchanges did not take sufficient measures to prevent illegal activity on their platforms.

Coinbase has yet to respond to a request for comment from Decrypt.

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