Summary: Coinbase, a San Francisco-based cryptocurrency platform, proclaimed they had no exposure to the Terra Network, Three Arrows Capital (3AC) or Celsius, in a blog post Wednesday. The blog post written by Brett Tejpaul, Head of Coinbase Institutional, Matt Boyd, Head of Prime Finance and Caroline Tarnok, Head of Credit and Market Risk outlined Coinbase’s approach ...
The blog post written by Brett Tejpaul, Head of Coinbase Institutional, Matt Boyd, Head of Prime Finance and Caroline Tarnok, Head of Credit and Market Risk outlined Coinbase’s approach to crypto financing, amid insolvency issues industry-wide.
“Solvency concerns surrounding entities like Celsius, Three Arrows Capital (3AC), Voyager, and other similar counterparties were a reflection of insufficient risk controls, and reports of additional struggling firms are fast becoming stories of bankruptcy, restructuring, and failure,” the authors said.
The blog post emphasized that these aforementioned crypto companies were carrying out risky lending practices, which Coinbase did not want to engage in. Instead, Coinbase said they focused on building their financing business with “deliberate focus on the client.”
Coinbase explained that risk management is their first principle for conducting business, which has resulted in no losses from their financing book, no exposure to client or counterparty insolvencies, no gating for client loan recalls or withdrawals and no changes in access to credit for their trading clients.
The authors then further outlined their strengths for creating a healthy investing environment. They noted they conduct rigorous due diligence, stress test their exposures, learn from previous industry mistakes, anticipate internal deficiencies and anticipate external surprises.
The blog post concluded with a footnote saying that while Coinbase “does not have counterparty exposure” to the three previously mentioned crypto companies, Coinbase’s venture program “did make non-material investments in Terraform Labs.”
Terraform Labs, 3AC and Celsius are the most notable crypto companies that have experienced crashes and great insolvency with the later two declaring for bankruptcy in the recent past. In addition, Terraform Labs and its founder, Do Kwon, are currently being investigated after their once prominent cryptocurrencies, UST and LUNA, lost 99% of their value in the course of several days.
That crash caused a ripple effect across the crypto world, which created insolvency problems for a number of crypto companies.
While Coinbase avoided exposure to these crypto companies, it is still dealing with a very troubled industry that has seen the overall prices of crypto plummeting. As a result, the publicly traded crypto exchanges stock has decreased nearly 74% year to date.
Last month, Coinbase CEO, Brian Armstrong, claimed that Coinbase planned to lay off 1,100 of its employees, which was about 18% of their workforce at that time.
Author: Tyler Irvin