Did Coinbase execute a $100M Txn to test proprietary trading?

Lavina Daryanani
The Cryptonomist

Coinbase and the proprietary trading saga ain’t something new. Back in 2018, for instance, a New York Virtual Markets Integrity report stated that the exchange disclosed almost 20% of the executed volume on its platform was attributable to its own trading.

Coinbase, however, went on to state that it did not operate a proprietary trading desk, nor did it undertake market-making actions. It further went on to clarify that the said figure represented customer-driven volume via Coinbase Consumer. 

Now, per the latest Wall Street Journal report, Coinbase had hired at least four senior Wall Street traders and had launched a group to generate profit by using the company’s cash to trade and stake crypto. Reportedly, people at the company had labeled the activity to be “proprietary” trading.

Coinbase’s PoV

Worth recalling here is that the exchange’s executives testified to the members of Congress last year that the company did not buy and sell crypto for its own account. Per Wall Street Journal’s unnamed sources, right after testifying the team had gotten into a transaction to test proprietary trading.

Earlier this year, the team completed a $100 million transaction that the group viewed as a test trade of the new effort, according to the people.”

Per the report, Coinbase acknowledged that some at the company examined pursuing proprietary trading, however, they decided against it. A spokeswoman for the exchange said,

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

In July last year, the exchange established its Risk Solutions unit to trade crypto for clients. Per Wall Street Journal’s sources, the group also made plans to begin making trades with Coinbase’s cash, among other strategies. Per the people, the team built sophisticated trading systems to enable this trading.

Refuting the said allegations, the exchange’s spokeswoman said,

“Coinbase Risk Solutions was established to facilitate client-driven crypto transactions,” and “conflict of interest mitigation tools and policies” were in place in the group.