The liquidity crisis experienced by the cryptocurrency exchange FTX has worried investors in the crypto money field. In addition, eyes were turned to other exchanges, as if waiting for explanations whether they would experience the same problems as FTX. Brian Armstrong, CEO of Coinbase, the largest crypto exchange in the USA, made a statement on the subject. Here are the details…
Statement from Coinbase CEO
Coinbase CEO Brian Armstrong said his exchange is not vulnerable to the kind of adversity that FTX has been exposed to this week. He said the “incident” surrounding FTX was due to risky business practices that Coinbase was not involved in. Earlier on Tuesday, as reported by Kriptokoin.com, FTX stopped withdrawals.
FTX and its CEO, Sam Bankman-Fried, had previously said on Twitter that the company’s assets were “in good standing.” He said that the intensity of withdrawals has returned to more “reasonable levels”. However, the CEO stated the next day that FTX was caught in a “liquidity crunch” with overwhelming withdrawal requests. Confirmed that it needs Binance’s support to protect client funds. Armstrong used the following statements:
“This event appears to be the result of risky business practices, including conflicts of interest between intertwined entities and misuse of client funds (lending of user assets).
Coinbase has no exchange tokens
In response, the CEO said that Coinbase does not touch customer funds after deposits unless directed by the customer. The exchange has made this clear in its previous statements as well, including the drop of Celsius, Voyager and Three Arrows Capital. These firms have lent their clients’ assets to generate returns with CeFi and DeFi institutions. But after Terra’s collapse in May, they all went bankrupt in turn.
Armstrong said Coinbase does not have any exposure with these firms, including FTX and Alameda Research. On Tuesday, FTT announced that it has no exposure to FTX or its sister company Alameda. FTT has dropped 73 percent in the last 24 hours. Coinbase has never issued an exchange token similar to FTT. It also publicly audited clients’ finances to ensure their funds were safe. So it looks like Coinbase has taken good precautions. However, it should be noted that this exchange is not inviolable.
Armstrong stated that these were “risky behaviors” that Coinbase did not “take” on, adding that the exchange does nothing with customer funds unless directed by them and that customers can withdraw their funds at any time. “Every investor and client can see our publicly audited financial statements,” he said. “This shows how we hold client funds.” “We have never issued an exchange token,” Armstong added, referring to the native token of the FTX exchange, which acts as collateral.