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Coinbase: Insolvent crypto firms have 'forgotten the basics of risk management'

 


Parts of the management of the influential crypto exchange Coinbase are now taking a position 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 context, the crypto exchange emphasizes that it has “no financial ties” to the companies concerned.


Coinbase's head of institutional business, Brett Tejpaul, Coinbase's head of lending, Matt Boyd, and Coinbase's senior risk manager, Caroline Tarnok, made the comments on the company's blog on Wednesday . The three senior officials state that their crypto exchange does not engage in "similar risky business practices" to those of Three Arrows Capital, Celsius and Voyager. Rather, the companies mentioned would have worked with “inadequate 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 imbalance.


“The problems were foreseeable, and inherent in the nature of lending, not in the nature of crypto,” agree Tejpaul, Boyd, and Tarnok. They add: “Many of these firms were exposed to far too much borrowing risk from short-term liabilities only covered by long-term, illiquid assets, which doesn't add up. We believe these market participants have caught the hype of a bull market and have forgotten the basics of risk management.”


Although Coinbase says it is "not affiliated with clients at risk of bankruptcy," the crypto exchange is also struggling in the ongoing bear market. Coinbase stock is down more than 42% since May, to just $75.27 at press time. CEO Brian Armstrong also announced in June that the trading platform would have to lay off almost 18% of the workforce due to the current situation.

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