Crypto exchange Coinbase has confirmed that the company “had no financing exposure” to bankrupt firms, including Celsius Network, Voyager Digital, and Three Arrows Capital (3AC). “The issues here were foreseeable and actually credit-specific, not crypto-specific in nature,” Coinbase stressed.
Coinbase: ‘We Have Not Engaged in These Types of Risky Lending Practices’
In a Wednesday blog post, Coinbase, a cryptocurrency exchange that is listed on the Nasdaq, clarified how it views cryptocurrency financing. This post was written 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 were a reflection of insufficient risk controls, and reports of additional struggling firms are fast becoming stories of bankruptcy, restructuring, and failure,” the Coinbase executives detailed, adding:
These issues were not crypto-specific but credit-specific and therefore foreseeable.
“Many of these firms 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 a crypto bull market and forgot the basics of risk management. Unhedged bets, huge investments in the Terra ecosystem, and massive leverage provided to and deployed by 3AC meant that risk was too high and too concentrated,” the executives explained, emphasizing:
Coinbase did not finance the above groups. This type of risky lending has not been practiced by Coinbase.
Coinbase pulled out of the Lend program launch in September 2013 after being threatened by the U.S. Securities and Exchange Commission.
The Coinbase executives further noted that their company is “focused on building our financing business with prudence and deliberate focus on the client.”
After crypto hedge fund Three Arrows Capital had filed for Chapter 15, Crypto lenders Celsius Network, Voyager Digital and Voyager Digital applied for Chapter 11 bankruptcy.
Coinbase has also revealed this in a blog post
While Coinbase does not have counterparty exposure to the companies listed above, Coinbase’s venture program did make non-material investments in Terraform Labs.
Terraform Labs, a Singapore company, is responsible for the crash of cryptocurrency terra (LUNA), and stablecoin terrausd(UST). South Korean authorities and U.S. Securities and Exchange Commission are currently investigating the firm.
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