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

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

On another note, the company received regulatory approval from the Dutch Central Bank to start providing 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 launched a division called “the Coinbase Risk Solutions group.” The purpose was to use the company’s own cash to trade and “stake” digital assets.

Earlier in 2022, the unit carried out a $100 million experimental transaction. Members of the firm, who remained anonymous, outlined that the move should be classified 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, it could cause a significant conflict between a firm and its customers.

A Coinbase spokesperson, however, said the creation of the group had different intentions. The unit was established to facilitate “client-driven cryptocurrency transactions,” they explained.

Another member of the organization revealed that Coinbase was considering propriety trading but later decided to take a different approach:

“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.”

Several months after the unit 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 an agency-only platform. We do not engage in proprietary trading on our platform.”

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

Greenlight From The Netherland’s Central Bank

In a recent announcement, Coinbase said it became the first major crypto platform to obtain registration approval from De Nederlandsche Bank — DNB (the country’s central bank). The latest authorization allowed the exchange to provide Dutch-based clients a “full suite of retail, institutional, and ecosystem products.”

Coinbase revealed its commitment to abide by the watchdogs’ rules, which could create a better environment for the cryptocurrency ecosystem and strengthen investors’ protection.

“As part of Coinbase’s ambition to be the world’s most trusted and secure crypto platform, we have taken strides to work collaboratively with government, policymakers, and regulators to shape the future in a responsible way.

The Netherlands is a critical international market for crypto, and I am really excited for Coinbase to bring 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 by securing a crypto asset service provider license in Italy. Thus, it became one of the few entities to meet the local regulators’ new requirements.