American cryptocurrency platform Coinbase denies accusations of artificially increasing the value of digital currencies and claims that some of its competitors are doing so.
Coinbase has hired traders to use the company’s own funds to trade and bet on cryptocurrencies for profit. The Wall Street Journal claims that $100 million worth of Coinbase funds were used in a test deal that the crypto exchange employees called their own. The exchange later denied the accusations in a blog post, stating that journalists had confused customer-facing activities with proprietary trading in their article:
“One of the strengths of our Institutional Prime platform is our trading model whereby we only act in the best interests of our clients. We do not consider this prop trading as the purpose is not to profit from short-term increases in the value of the digital currencies being traded.”
There is still debate about how proprietary trading affects the economy. Some believe that the 2008 US financial crisis was caused by prop trading. In order to prevent a repetition of the situation of 14 years ago, in 2010 the “Volcker Rule” was introduced, according to which banks and large financial institutions cannot make large speculative investments using their own funds to buy and sell securities, derivatives and commodity futures.
Earlier, Coinbase CEO Brian Armstrong said that regulatory enforcement measures against cryptocurrency companies are holding back the development of the industry.