Coinbase Global has reportedly been using company cash to trade and stake cryptocurrencies in an effort to generate new sources of revenue, according to the Wall Street Journal.
Established in July last year with the hiring of at least four Wall Street traders, the original intent of the Risk Solutions unit was to trade cryptocurrencies on behalf of clients. After making plans to begin trading with company cash, the team started building sophisticated systems to facilitate those transactions, anonymous sources said.
The group then managed to generate profit by using those funds to trade and stake cryptocurrencies. Viewed as a test trade for the new effort, the team managed to complete a $100 million transaction earlier this year, the sources said.
Coinbase raised the money by guaranteeing a $100 million “structured note” then sold to Invesco Ltd. at a fixed-rate of 4.01%.
According to the sources, the company used the $100 million to profit in cryptocurrency markets. Meanwhile, employees hired for the project described the activity as “proprietary” trading.
For its part, Coinbase said some at the company had examined pursuing proprietary trading but ultimately decided against it. Financial firms that invest their own money as well as their clients’ are at risk of potential conflicts of interest.
However, five months after the Coinbase Risk Solutions unit was created, Coinbase Chief Financial Officer Alesia Haas testified before Congress that, “we do not engage in proprietary trading on our platform,” which she later reiterated when questioned by Rep. Alexandria Ocasio-Cortez.
“Our statements to Congress accurately reflect our actual business activities,” a Coinbase spokeswoman emphasized “Coinbase does not, and has never, had a proprietary trading business. Any insinuation that we misled Congress is a willful misrepresentation of the facts.”
Later, in a statement to Rep. Maxine Waters the company admitted that it, “does, from time to time, purchase cryptocurrency as principal for specific purposes that we do not view as proprietary trading because its purpose is not for Coinbase to benefit from increases in value of the cryptocurrency being traded.”
Meanwhile, Coinbase announced that it had successfully registered with the central bank of the Netherlands, De Nederlandsche Bank (DNB), to operate as a crypto service provider in the region. With the approval, Coinbase became one of the first prominent exchanges to receive a DNB registration.
The crypto exchange is now authorized to offer a wide range of its services, including retail, institutional, and ecosystem products. With the passage of the European Union’s Markets in Crypto Assets (MiCA) bill, this would also grant it authorization through the EU.