- Coinbase defended its ETF custody and new cbBTC offering.
However, the community sought clarity on its cbBTC BTC backing.
As a seasoned researcher with a penchant for deciphering the intricacies of the cryptosphere, I find myself deeply intrigued by the ongoing saga surrounding Coinbase and its offerings. While it’s commendable that Coinbase is expanding its product lineup with cbBTC, the questions raised about its reserves are a cause for concern, especially in an industry where trust and transparency are paramount.
On September 15th, there was widespread news about Coinbase due to the close examination and accusations that they were not transparent with their Bitcoin (BTC) reserves.
After the introduction of wrapped BTC (cbBTC) by the world’s leading crypto custodian, there has been a significant surge in interest within the community. This digital asset, which serves as a derivative of Bitcoin, is particularly valuable due to its use as collateral within the Decentralized Finance (DeFi) sector.
Additionally, there were allegations within the community that Coinbase had sold paper Bitcoin to BlackRock, but without the necessary one-to-one backing for each Bitcoin sold.
In short, members sought to know Coinbase’s BTC reserves for its cbBTC and BlackRock ETF.
Coinbase defends itself
In a rejoinder, Coinbase founder Brian Armstrong defended the firm on the two claims. Regarding the BlackRock allegations, he stated that Deloitte audits the firm annually, and it can’t share clients’ wallet addresses.
Each year, Deloitte conducts an audit on us since we’re a publicly traded company. It’s unlikely that our institutional clients desire us to disclose their private addresses, as it’s not our role to do so.
On previous occasions, similar accusations have been levied. Back in May, the very same charge was leveled at both Coinbase and BlackRock.
On the contrary, ETF specialists such as Eric Balchunas from Bloomberg, disputed the claims made in May. Their reasoning was that the absence of transparency stemmed from a scarcity of ‘in-kind’ redemptions within the structure of ETFs.
Additionally, Balchunas strongly disputed the recent accusations. Notably, Arkham closely monitors a majority of ETF providers and their assets, making it possible to confirm these details.
CbBTC’s reserves questions remain
That said, Armstrong’s statement about cbBTC left more questions than answers. He said,
In my role as an analyst, I’d like to clarify a point regarding cbBTC. It’s important to understand that by using this service, you are indeed entrusting a centralized custodian with the safekeeping of your Bitcoin (BTC). We’ve always been transparent about this aspect and wanted to make sure this was clear to everyone using our platform.
Some community members believe that while the company serves as the primary guardian of funds, it should still provide a means for individuals to confirm the Bitcoin backing for their cbBTC.
1) The principle of transparency is deeply ingrained in blockchain culture. Unfortunately, Armstrong’s comments about cbBTC were not considered completely convincing. A market observer noted that…
“They refuse to offer evidence supporting their assertion about the Bitcoin (BTC) they supposedly possess, as well as the backing for their recently introduced paper BTC known as cbBTC. If they overproduce paper BTC, they risk following the path of FTX.
In simpler terms, the digital asset cbBTC offered by Coinbase will face off against WBTC from BitGo, which plans to shift its custody responsibilities to Justin Sun’s company. This situation might be interpreted as a struggle for dominance in the market.
However, it remains to be seen whether Coinbase will disclose its cbBTC’s backing.
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2024-09-16 08:08