Coinbase Trading Desk Plans Revive Market Manipulation Concerns

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Key Takeaways

Coinbase employed a gaggle of Wall Street merchants to check out a buying and selling desk final yr, The Wall Street Journal has reported.
A consultant from the trade reportedly claimed that the desk was arrange for shoppers somewhat than for its personal buying and selling exercise.
Other main crypto exchanges and their senior executives have come below fireplace for his or her crypto buying and selling exercise up to now.

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Coinbase reportedly examined the buying and selling arm after crew members testified earlier than Congress that it didn’t use its personal accounts to commerce crypto. 

Coinbase Tests Trading Desk, WSJ Claims

Coinbase examined launching an inner buying and selling desk in 2021, The Wall Street Journal has reported. 

A Thursday report quoting a number of sources acquainted with the matter claims that the crypto trade titan employed a minimum of 4 Wall Street merchants to arrange a “proprietary” buying and selling desk referred to as Coinbase Risk Solutions. The group was employed to commerce and stake crypto to generate revenue, the sources mentioned. 

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The report additional added that Coinbase Risk Solutions accomplished an preliminary $100 million transaction earlier this yr after elevating funds by way of a structured be aware it had bought to Invesco. Coinbase staff had been reportedly discouraged from sharing details about the enterprise or discussing it in inner communications. 

Several senior Coinbase crew members testified earlier than Congress in 2021, they usually claimed that the agency didn’t use its personal money to commerce crypto. When questioned by The Wall Street Journal, a consultant insisted that the agency had not arrange a proprietary buying and selling desk. “Any insinuation that we misled Congress is a willful misrepresentation of the facts,” they reportedly mentioned. The consultant added that “Coinbase Risk Solutions was established to facilitate client-driven crypto transactions,” however the sources claimed that the agency was additionally weighing utilizing its personal money for some actions. The merchants that had been employed for Coinbase Risk Solutions have since left the corporate, the report mentioned. 

Exchange Bosses Trading the Market

In the U.S., there are at the moment no restrictions stopping cryptocurrency exchanges like Coinbase from launching their very own proprietary buying and selling desks, regardless of rising regulatory issues over doable market manipulation. While not one of the main exchanges focuses on buying and selling as a part of its core enterprise exercise, some companies have triggered controversy as a consequence of their senior figures actively buying and selling out there up to now. 

Perhaps the perfect instance of questionable buying and selling exercise involving main crypto exchanges facilities on Sam Bankman-Fried, the founder and CEO of FTX and co-founder of the quantitative buying and selling agency Alameda Research. Before organising FTX, Bankman-Fried was greatest recognized within the crypto area for his distinctive buying and selling abilities, which helped him hit billionaire standing earlier than the age of 30. FTX doesn’t have a proprietary buying and selling desk, however the tight relationship it shares with Alameda has usually raised questions over the ethics of exchanges and their workers buying and selling the market, even after Bankman-Fried stepped down as CEO in 2021. 

Alameda has change into notorious for yield farming crypto tokens and buying and selling FTX’s perpetual brief merchandise, usually leading to brutal worth crashes. Bankman-Fried was additionally credited with bringing an finish to crypto’s so-called “DeFi summer” interval by dumping farmed Yearn Finance tokens available on the market weeks after he saved Sushi from collapse. While Bankman-Fried has stepped again from his buying and selling agency since FTX noticed fast progress in 2021, his and Alameda’s ruthless market exercise has change into one thing of a operating joke within the area. 

Similarly, BitMEX co-founder Arthur Hayes turned infamous for buying and selling the market throughout his stint because the derivatives trade’s chief government officer. An notorious screenshot hints that Hayes engaged in market manipulation by ordering a co-worker to “run the stops” on BitMEX prospects as a result of he “[needed] a new Ferrari.” In May, Hayes was sentenced to 2 years probation and 6 months home arrest for BitMEX’s failure to implement enough anti-money laundering measures. He’s nonetheless an energetic dealer, nonetheless. 

While Coinbase hasn’t gone fairly so far as FTX or BitMEX and their high figures, if The Wall Street Journal report is to be believed, the buying and selling desk plans will probably elevate issues over the trade’s enterprise operations. 

Disclosure: At the time of writing, the writer of this piece owned SUSHI, ETH, and a number of other different cryptocurrencies. 

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