Coinbase crypto exchange admits to “conflict of interest” crypto trading worth $100M

After several controversies, reports have emerged that Coinbase has admitted to trading in the crypto market.

Coinbase acquired $100 million through its “Risk Solutions” group to trade cryptocurrency in a desperate attempt to profit. This activity amounts to a conflict of interest between the cryptocurrency exchange and its customers.

Further, the reports indicate that Coinbase confided these dealings to Rep Maxine Waters from the District of California. The firm admitted that it traded cryptocurrency as “principal for specific purposes.” Coinbase argued that it doesn’t see it as proprietary trading because the firm intended to soar the value of the assets, with no plans to make a profit for Coinbase.

Coinbase has refused to admit to engaging in proprietary trading.

Though, the firm admitted to investing the funds on behalf of its clients. Consequently, the investment still amounts to proprietary trading. When a financial service provider invests on behalf of its client while investing its own funds, the action can amount to risk and conflict of interest with its customers.

Prominent analysts in the cryptocurrency space have reacted to the situation.

Generally, they opined that the leadership of Coinbase is aiming to protect the firm’s image while diversifying its current services to enhance Coinbase’s growth. One of the analysts, Mark Palmer, said the firm doesn’t want to be seen as taking needless risks.

He describes how retail customers are more interested in the stability of a cryptocurrency exchange. Palmer highlighted the need for Coinbase to diversify due to its reliance on transactions from retail customers.

How Coinbase denied engaging in proprietary trading in the past

Sequel to the recent attestation, the cryptocurrency exchange has denied ever involving in proprietary trading.

During an invitation to the U.S Congress in December 2021, The Chief Financial Officer of Coinbase, Alesia Haas, distanced the cryptocurrency exchange from the allegations. Then, Ms. Haas described Coinbase as an agency-only platform, emphasizing that the firm doesn’t engage in proprietary trading.

She maintained this position while facing questions from Rep. Alexandria Ocasio-Cortez from the District of New York.

Meanwhile, the cryptocurrency exchange had created a Risk Solution Unit to trade cryptocurrency around July 2021.

Sources disclose that Alesia Haas knew about the unit’s establishment with Brett Tejpaul, another organization’s top official heading the team. In order to conceal the Unit from the general public, Coinbase prevented its employees from relaying information about the unit.

The firm’s desperation to diversify its business comes during a difficult period that has befallen the cryptocurrency space. Coinbase generates revenue from transactions on its platform like every other cryptocurrency exchange.

With the crisis the crypto space endured this year, trading volume dropped massively. Thus, affecting the firm.