The company’s chief policy officer rebuffed the New York Attorney General’s report that the exchange uses proprietary trading.
The American company Coinbase, one of the leading virtual coin exchanges, denied allegations from the New York Attorney General (AG) of using its own account for engaging in cryptocurrency trading. Coinbase chief policy officer Mike Lempres offered the rebuttal in a blog post on Thursday. Earlier this week Barbara Underwood, AG of the New York state, published a virtual markets report saying that “Coinbase disclosed that almost twenty percent of the volume executed on its platform was attributable to its own trading.”
However, according to Lempres, this conclusion is not correct as Coinbase does not operate a proprietary trading desk and does not engage in market-making actions. “When we execute these trades, we do so on behalf of Coinbase Consumer customers, not from own account and for own profit,” the exchange’s executive explained in the post, called “Correcting the record.”
“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,” the chief policy officer noted.
Coinbase is one of nine exchanges that had voluntarily contributed to the non-compulsory request of the New York AG. Based on the data collected, Underwood issued a report, which highlighted various problems in the virtual coin market. Among the hot issues are several abusive trading practices such as own-account use by some of the exchanges. The AG pointed out Poloniex, BitFlyer USA, Bitfinex, Tidex, and Coinbase. Proprietary trading rises concerns about the market integrity of these platforms, the AG said.
“Such high levels of proprietary trading raise serious questions about the risks customers face on those platforms. As a general principle, when a significant percentage of the volume in one or more assets on a venue is attributable to one source, customers face the risk that the availability of liquidity in those assets could change, without notice and at any time, including when liquidity is needed most – namely, in times of market volatility or rapid price movement,” Underwood wrote.
Coinbase will continue to cooperate with the regulators and generally welcomed the Underwood report as it “shines a helpful spotlight on important compliance issues,” Lempres said in the blog post.
The New York AG report is one of the hotly discussed topics in the crypto community these days. Kraken, an exchange that had refused to cooperate with Underwood, has denied the Attorney General’s conclusion that the company may be working illegally in New York State.