Coinbase has said in a blog post that it is not financially exposed to bankrupt and restructuring crypto companies, including Three Arrows Capital, Celsius, and Voyager Digital.
Coinbase is not exposed to the crypto companies that are currently engulfed in bankruptcy, restructuring and such other troubles, the crypto exchange has reaffirmed.
The company is moving to reassure its customers and the broader crypto community that its business and consequently client assets are safe amid all the contagion within the crypto market.
Nasdaq-listed Coinbase says it has “no financing exposure to the groups” of platforms that have hit turbulence and that the company did not engage in the lending malpractices associated with many of the platforms.
The exchange’s reassurance comes as Zipmex became the latest platform to pause withdrawals citing liquidity issues and exposure to beleaguered counterparties.
A ‘credit specific’ problem
Writing in a blog post, Coinbase executives Brett Tejpaul (Head of Coinbase Institutional) Matt Boyd (Head of Prime Finance), and Caroline Tarnok, (Head of Credit and Market Risk) noted that “the shocks to the crypto credit environment over the last few weeks are likely to be a major inflection point for the industry.”
According to Coinbase, the solvency issues currently surrounding crypto firms like lender Celsius, and Voyager Digital, and hedge fund Three Arrows Capital (3AC), reflect the lack of risk controls during the bull market.
The failing companies have what the firm sees as a “credit specific” problem, which has nothing to do with them being just crypto platforms.
“Many of these firms were overleveraged with short term liabilities mismatched against longer duration illiquid assets,” the Coinbase executives wrote in the blog post.
Coinbase notes that the events around the unhedged bets, with massive exposure to the collapsed Terra ecosystem, and 3AC are highlights of similar events in the traditional financial markets – the 1990s Long Term Capital Management and 2000s Lehman Brothers among the standout episodes.