crypto exchange Coinbase has confirmed that the company has “no financing We have no exposure.” The issue here is foreseeable and is actually credit-specific, not crypto-specific.” Coinbase emphasized.
Coinbase is We are not involved in such risky lending practices.”
Nasdaq-listed cryptocurrency exchange Coinbase revealed its approach to cryptocurrency lending in a blog post on Wednesday. The post is authored by Brett Tejpaul, head of Coinbase Institutional; Matt Boyd, head of Prime Finance; and Caroline Tarnok, head of Credit and Market Risk.
“Solvency concerns surrounding entities like Celsius, Three Arrows Capital (3AC), Voyager, and other similar counterparties are a reflection of poor risk management, with additional struggling companies reporting bankruptcies, restructurings, and failure stories as quickly.” A Coinbase executive elaborated, adding.
It is worth noting that the problems here are foreseeable and are actually credit-specific, not crypto-specific.
“Many of these companies were overleveraged with short-term liabilities mismatched against longer duration illiquid assets,” they noted.
“We believe these market participants were caught up in the frenzy of the crypto bull market and forgot the basics of risk management. The unhedged bets, the huge investment in the Terra ecosystem, and the massive leverage offered and deployed in the 3AC meant that risk was too high and too concentrated,” the executives explained, emphasizing:
Coinbase had no financing exposure to the above groups. We are not involved in this type of high-risk lending activity.
Last September, Coinbase decided not to launch the Lend Program after the U.S. Securities and Exchange Commission (SEC) threatened to sue the company if it proceeded.
Coinbase executives further stated that the company is “focused on carefully and deliberately building a customer-focused lending business.”
Crypto lenders Celsius Network and Voyager Digital filed for Chapter 11 bankruptcy earlier this month after crypto hedge fund Three Arrows Capital filed for Chapter 11 bankruptcy.
Coinbase also disclosed in a blog post.
Coinbase has no counterparty exposure to the companies mentioned above, but Coinbase’s venture program made an insignificant investment in Terraform Labs.
Singapore-based Terraform Labs is the company behind the collapsed cryptocurrency terra (LUNA) and stablecoin terrausd (UST). The company is currently being investigated by South Korean authorities and the U.S. Securities and Exchange Commission (SEC).
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