Coinbase Refutes Accusations From NY Attorney General That it Engages in Proprietary Trading

U.S. based cryptocurrency exchange Coinbase has denounced reports that the company engages in proprietary trading which accounts for a large percentage of its overall trading volume.


U.S. based cryptocurrency exchange Coinbase has denounced reports that the company engages in proprietary trading which accounts for a large percentage of its overall trading volume.

Coinbase: we don’t engage in proprietary trading

In an official statement published on September 20, Coinbase discredits media reports which claim that the cryptocurrency exchange performs proprietary trading.

In the publication, Coinbase states that the media reports inaccurately characterized the results of the New York Virtual Markets Integrity Report.

Coinbase accused of proprietary trading

Propriety trading is a common practice in the crypto industry, and it involves a cryptocurrency exchange trading on its own platform against its customers.

The claims that Coinbase performs proprietary trading came just after the New York Attorney General’s office (OAG) report.

The OAG report on virtual currency and cryptocurrency exchanges was the outcome of an investigation into cryptocurrency exchange policies and operations.

According to the report, most cryptocurrency exchanges are engaging in proprietary trading and have a conflict of interest with its other lines of businesses.

The publication “Virtual Markets Integrity Initiative” stated that roughly 20 percent of all trades executed on Coinbase were linked to trades performed by the crypto exchange.

The report raised serious questions about the risks customers who use exchanges that perform proprietary trading face.

According to the OAG, such exchanges could mislead traders about the true liquidity of its future, and thus hinder the ability of customers to execute trades during periods of peak market volatility.

Amy Spitalnick, a spokeswoman for the OAG noted that:

“All the information in the report came directly from the platforms, via the questionnaire they filled out.”

Coinbase Customer Service

Mike Lempres, Chief Policy Officer at Coinbase announced via a blog post that the San Francisco based FinTech does not trade for its own benefits, contradicting reports that emerged online.

Lempres opposes the reports issued by the New York’s attorney general which stated that Coinbase accounted for almost 20 percent of the volume on its own platform, mostly on a proprietary basis.

According to Lempres, although Coinbase performs these transactions, these transactions are executed on behalf of clients who use the firm’s Coinbase Consumer service. Lempres wrote in his blog post:

“Coinbase does not trade for the benefit of the company on a proprietary basis. In order to provide an easy-to-use customer experience, Coinbase Consumer quotes a price and then quickly fills the order from our exchange platform (Coinbase Markets). This takes advantage of the liquidity provided by the entire Coinbase ecosystem.”

In his blog post, Lempres goes on to explain that when customers use the Coinbase Consumer, they see a single buy and sell price for each of the assets listed on the platform, not the full order-book displayed on a centralized exchange.

Lempres explains that when customers place orders through the brokerage, the company fills the order from Coinbase Markets, its centralized exchange platform, so the customer only sees funds enter or leave their personal wallet.

He also clarified the exchange does not operate an in-house trading desk nor does it act as a market maker, through which firms can buy and sell orders to cause an increase in a trading pair’s liquidity.

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