Crypto News

Coinbase Hired Wall Street Traders To Test Proprietary Trading (Report)

California-based cryptocurrency exchange – Coinbase – has reportedly appointed at least four Wall Street traders and formed a group to use the company’s own funds to trade cryptocurrencies to use. Unnamed members of the platform described the activity as “proprietary trading.”

In addition, the company received regulatory approval from the Dutch Central Bank to offer its products and services on the domestic market.

The $100 million test transaction

According to a recent report by The Wall Street Journal, Coinbase hired at least four experienced traders in 2021 and created a division called The Coinbase Risk Solutions Group. The purpose was to use the company’s own cash funds to trade and “stake” digital assets.

In early 2022, the unit completed an experimental $100 million transaction. Members of the firm, who remained anonymous, said the move qualifies as “proprietary trading.”

Such activity occurs when a company invests for direct market gain rather than earning a commission by trading on behalf of clients. Needless to say, this can create a significant conflict between a company and its customers.

However, a Coinbase spokesperson said the group’s creation had other intentions. The entity was formed to facilitate “customer-driven cryptocurrency transactions,” they explained.

Another member of the organization revealed that Coinbase considered proprietary trading but later decided to take a different approach:

“Our statements to Congress accurately reflect our actual business activities. Coinbase has not and has never had a proprietary trading business. Any suggestion that we misled Congress is a willful misrepresentation of the facts.”

A few months after the entity’s launch, the exchange’s Chief Financial Officer – Alesia Haas – testified before the relevant authorities that the firm was not involved in such activities:

“Coinbase is purely an agency platform. We do not engage in proprietary trading on our platform.”

It’s worth noting that the $100 million transaction involved a “structured note” sold to American investment management firm Invesco. A spokesman confirmed the deal, saying that the firm has “no direct exposure to cryptocurrency” and that “this is no longer an active position.”

Green light from the Dutch central bank

In a recent Notice, Coinbase said it was the first major crypto platform to receive registration approval from De Nederlandsche Bank – DNB (the country’s central bank). The recent approval allowed the exchange to offer Dutch-based clients a “full range of retail, institutional and ecosystem products.”

Coinbase has announced its commitment to abide by watchdog rules, which could create a better environment for the cryptocurrency ecosystem and strengthen investor protection.

“As part of Coinbase’s commitment to be the world’s most trusted and secure crypto platform, we have endeavored to work with governments, policymakers and regulators to shape the future in responsible ways.

The Netherlands is a critical international market for crypto and I am very pleased that Coinbase is bringing the potential of the crypto economy to the market here,” said Nana Murugesan – a top executive at the company.

Earlier this year, Coinbase expanded its presence in Europe fuse a crypto asset service provider license in Italy. This made it one of the few companies to comply with the new requirements of local regulators.

Source: Crypto News Deutsch

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