Crypto exchange Coinbase says it does not engage in proprietary trading, a speculative investment practice that the federal regulation known as the Volcker Rule restricts because of its role in the 2008 financial crisis.
In a new blog post, the California-based firm refutes a claim by The Wall Street Journal that it uses its own money to speculate on crypto assets.
The newspaper in an article published on September 22nd says that Coinbase hired at least four senior traders to use the company’s own funds to trade, stake and lock up cryptocurrencies for profit. The report says that people at Coinbase describe the activity as proprietary trading.
“Coinbase does, from time to time, purchase cryptocurrency as principal, including for our corporate treasury and operational purposes. We do not view this as proprietary trading because its purpose is not for Coinbase to benefit from short-term increases in value of the cryptocurrency being traded.”
Coinbase says it did form a new team called Coinbase Risk Solutions (CRS) but it was launched to provide solutions and assistance to institutional investors seeking exposure to digital assets.
“The goal of CRS is to expand institutional participation in web3 beyond HODLing.
In doing this, we are following a well-trodden path on Wall Street where financial services firms provide clients multiple ways to get exposure to new asset classes and manage certain risks. We have tools and policies in place that mirror best practices in the financial services industry and are designed to manage conflicts of interest.”
Coinbase is facing allegations of proprietary trading as its CEO, Brian Armstrong, calls crypto regulation a national security issue in the US. The firm is also preparing to offer its services in The Netherlands after it became the first major crypto exchange to win the approval of the Dutch Central Bank to operate in the country.
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