Coinbase says it’s not a proprietary trading platform

The journal published an account of the exchange's trading activities earlier this year and claims it amounts to proprietary trading. Coinbase said in a blog post that it was wrong.

The journal reported early on Thursday that Coinbase executed a $100 million transaction that was seen internally by the company's Risk Solutions business, which had been established for the purpose of proprietary trading, as a test trade.

Banks and other financial organizations engage in proprietary trading when they trade their own funds for profit rather than to receive a commission from a client.

This is significant for the purposes of a conflict of interest. If Coinbase is trading for its own gain, this could hinder the interests of users who trade the same digital assets, as the platform's buy and sell orders may cause fluctuations in the value of the coins its users own.

In the blog post, the exchange made clear that it doesn't trade for its own benefit, responding to WSJ's claims.

Unlike many of our competitors, Coinbase does not operate a proprietary trading business or act as a market maker, according to the blog post. One of the competitive strengths of our Institutional Prime platform is our agency only trading model, where we only act on behalf of our clients. Coinbase launched a risk mitigation unit called Coinbase Risk Solutions CRS last year to trade criptocurrency for clients, according to the Journal. The group has decided to trade with Coinbase's money, in addition to other ambitions, according to the WSJ.

The asset platform, the CRS, was created to make cryptocurrencies and Web 3 more accessible to institutional investors and make it easier for them to trade in the Bitcoin asset class.

Coinbase does buy cryptocurrencies outright for a variety of reasons, including its corporate treasury and daily operations.

The platform said in its post that the platform does not view this as proprietary trading because it is not intended for Coinbase to benefit from short-term increases in value of the criptocurrency being traded.