The Risk Solutions Unit at Coinbase allegedly exploited company resources to speculate on cryptocurrencies to increase income, according to a Wall Street Journal story.
According to a report, Coinbase traded cryptocurrencies using company funds. Coinbase created the Risk Solutions Unit last year with the intention of bringing in money for the company. Four Wall Street traders were hired by Coinbase, according to The Wall Street Journal.
Those in the know refer to the team’s speculation in bitcoin as “proprietary trading,” and the team is alleged to have done so utilizing the company’s resources. The paper also describes how Coinbase’s Risk Solutions Unit was created with the intention of trading bitcoins for its customers while simultaneously offering tools and rules for preventing conflicts of interest.
Before concentrating on creating intricate financial tools to expedite commercial operations, the team started trading using company funds. The group allegedly invested in and traded cryptocurrency using corporate profits in order to steadily enhance their wealth. Additionally, Coinbase completed a test trade offer for $100 million using the recently developed method.
On the other hand, Coinbase has responded with a variety of remarks that suggest the business very briefly considered looking into proprietary trading before abandoning the idea. During testimony before Congress, Alesia Haas, a spokesperson for Coinbase, claimed that the firm had never thought about engaging in proprietary trading.
In addition, Coinbase occasionally purchases cryptocurrencies “as principal,” including for its corporate treasury and operational needs, but the company does not view these purchases as proprietary trading because “Coinbase does not stand to gain from gains in the value of the cryptocurrency being traded.” In 2010, laws were passed that made it illegal for banks and other financial organizations to look into speculative businesses. Due to the speculative market’s unpredictable character and inconsistent market velocity, these laws were created to prevent financial institutions from participating in it.
The involvement of institutions in speculative cryptocurrency businesses, according to regulators, might lead to a number of risks and a possible conflict of interest that, in the long run, could harm investors and consumers.
