Coinbase Tackles Insolvency Rumours

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  • Coinbase has tackled rumours that it is at risk from insolvency
  • The exchange published a blog post outlining its approach to risk
  • Unsubstantiated rumours of insolvency have been doing the rounds for a week or so

Coinbase has moved to tackle rumours that it is the next likely candidate for insolvency in the crypto space with a blog post that distanced itself from the practices of firms that have gone under. There have been suggestions from some sources that Coinbase cannot back the claims of its customer 1:1, although these are not supported by evidence, and Coinbase used its blog to dispel these rumours and outline how it handles risk with third parties.

Coinbase Rumours Unsubstantiated

It appears that the idea of Coinbase being insolvent began last week when it announced that it is temporarily shutting down its affiliate-marketing program in the US, citing the onset of the crypto winter, while its NFT platform is also suffering due to lack of use. It also recently announced that it was merging its Coinbase Pro platform into its main platform.

According to some less than reliable sources, such as shill-for-hire and crypto news whore BitBoy Crypto, “there could be trouble ahead for CB”, with a recent tweet of his adding that if Coinbase were to go insolvent, this would “break crypto the crypto space like we have never seen before.” There have also been suggestions that Coinbase is not honouring withdrawals, but this seems to be isolated cases which may have an alternative story behind them.

This non-news was seized on by anti-Coinbase site Coingeek, whose proprietor is funding Craig Wright’s lawsuit against Coinbase, which immediately amplified the FUD for their own means. An attempt from one anti-Coinbase Twitter user attempted to use a poll to back up his assessment, only for it to backfire:

Coinbase Hits Back

Coinbase addressed these issues yesterday, with three Coinbase executives outlining in the blog post how the company is better managed than the other platforms. The blog post opined that many of the firms that are in financial trouble were “caught up in the frenzy of a crypto bull market and forgot the basics of risk management”, engaging in “Unhedged bets, huge investments in the Terra ecosystem, and massive leverage provided to and deployed by 3AC meant that risk was too high and too concentrated.”

The piece added that Coinbase “had no financing exposure to the groups above”, apart from “non-material investments in Terraform Labs” and is instead “focused on building our financing business with prudence and deliberate focus on the client.”

Antipathy Driven by Agendas

Coinbase reaffirmed that “We hold customer assets 1:1” and that any institutional lending activity is at the discretion of the customer and backed by 100% in collateral or more, protecting Coinbase from any issues with the counterparty. It also outlined its approach to risk, outlining how it analyses prospective clients and puts them through their figurative paces before accepting them.

Of course, we have nothing but Coinbase’s word on this, but the fact that it has no exposure to third-party insolvencies and no losses from its financing book suggests that things aren’t as bad as the doom mongers are saying. Of course, those with an axe to grind will maintain that Coinbase is in trouble for as long as it suits them.