Coinbase posted in a blog article that it isn’t financially exposed to bankrupt or restructuring crypto companies like Voyager Digital, Celsius and Three Arrows Capital.
Coinbase is not currently exposed to crypto companies in restructuring, bankruptcy or other problems. The crypto exchange has reaffirmed.
The company is trying to reassure its customers, and the wider crypto community, that its business and therefore client assets are safe in the face of all the contagion occurring 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.”
Coinbase says that crypto firms such as Voyager Digital, Voyager Digital, or lender Celsius are facing solvency issues. Three Arrows Capital, meanwhile, is experiencing 3AC. This is a result of the lack risk control during the bull markets.
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.