Coinbase sees the situation of large crypto companies as self-inflicted.
Risk management of Celisus, Voyager and Three Arrows was “inadequate”.
Problems are not caused by the crypto market, but by fundamental problems in the lending business.
Parts of the management of the influential crypto exchange Coinbase are now taking a stand on the ongoing crisis in the crypto market and the associated bankruptcies of large crypto companies such as Three Arrows Capital, Celsius Network and Voyager Digital. In this regard, the crypto exchange emphasizes that it itself has “no financial connections” with the companies in question.
Brett Tejpaul, head of institutional business at Coinbase, Matt Boyd, head of credit business at Coinbase and senior Coinbase risk manager Caroline Tarnok made the corresponding statements on the company’s own blog on Wednesday. For example, the three senior officials state that their crypto exchange does not engage in “similarly risky business practices” as Three Arrows Capital, Celsius and Voyager. Rather, the companies mentioned would have worked with “insufficient risk control mechanisms” and would have made “bets without hedging” with large investments in companies such as the failed blockchain project Terra (LUNA), which ultimately led to the current predicament.
“The problems were predictable, and are due to the nature of the lending business, not the nature of crypto,” as Tejpaul, Boyd and Tarnok also agree. They add: “Many of these companies were exposed to far too high a borrowing risk due to short-term liabilities that were only covered by long-term, illiquid assets, which does not fit together. We are convinced that these market participants have been infected by the hype of a bull market and have forgotten the basics of risk management.“
Although Coinbase, according to its own statements, “is not in touch with clients who are threatened with bankruptcy,” the crypto exchange also has quite a nibble at the ongoing bear market. For example, the Coinbase share has fallen by more than 42% since May and is only $ 75.27 at the time of writing. CEO Brian Armstrong also announced in June that the trading platform will have to lay off almost 18% of the workforce due to the current situation.