On September 22, The Wall Street Journal reported that Coinbase engaged in proprietary trading.
The report stated the exchange established a trading group to trade cryptocurrencies using $100 million of the company funds. It allegedly tested its proprietary trading’s effectiveness, and those who are familiarised with the product claimed the exchange generated profits.
Coinbase was able to raise funds via a structured note that was sold to investment company Invesco Ltd, which was officially confirmed by Invesco.
The Coinbase Risk Solutions group used the capital of the firm to trade, stake, and lock up cryptocurrencies, according to Wall Street, which claimed that Coinbase hired at least four top Wall Street traders for the aforementioned division.
Individuals with knowledge of the situation argued that the Risk Solutions Unit was using Coinbase’s fund and trading for clients.
The formation of the division is said to have involved Coinbase executives such as Alesia Haas, the Chief Financial Officer, and Brett Tejpaul, the lead of institutional sales, trading, custody, and prime services.
Coinbase has refuted that allegation with a blog post, saying that the WSJ has mixed up client-driven activities with proprietary trading. The post writes that Coinbase does not deal with “proprietary trading business or act as a market maker.”
The exchange said that the Coinbase Risk Solutions serves to help institutional investors looking to gain exposure to crypto. The aim of the team is to increase institutional web3 engagement outside of Hodling.
In the previous year, when executives from Coinbase testified before Congress, they denied that company have engaged in proprietary trading.
Although Coinbase is free to deal with speculative trading, it has certainly raised some concerns regarding the risks.
When a financial institution invests its own capital and the money of its clients in the market, there could be conflict of interest and market manipulation.
