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No Significant Risk Exposure to FTX or FTT, Says Coinbase CEO

Annie Li   Nov 09, 2022 09:05 2 Min Read

Amid the meltdown of FTX, Coinbase CEO Brian Armstrong tweeted that Coinbase has no significant exposure to FTX and its platform currency FTT, as well as Alameda’s exposure.

Coinbase CEO Brian Armstrong said that the crash of the FTT token on the FTX exchange appears to be the result of high-risk business practices, including conflicts of interest between related entities and misuse of customer funds (lending user assets).

The Coinbase exchange said it would not engage in this type of high-risk activity. Without customer instructions, Coinbase said it never uses customer deposits for other businesses, and users can withdraw assets at any time.

As a publicly listed exchange in the United States, Coinbase’s financial audit is open to all investors and customers. Coinbase has never issued its platform token.

Armstrong emphasized that Coinbase should continue to work with regulators and policymakers around the world in the future to establish reasonable regulations for centralized exchanges or custodians in each market to build trustworthy and reliable products for the industry, but currently, there is not yet a level playing field.

Sam Bankman-Fried, founder and CEO of cryptocurrency exchange FTX, manages assets through Alameda Research, a quantitative cryptocurrency trading firm he founded in October 2017.

This summer, FTX CEO Sam Bankman-Fried has been buying up crypto companies that have been caught up in the credit crunch caused by the sudden collapse of cryptocurrencies Luna and UST or TerraUSD.

However, the leaked balance sheet of Alameda Research shows that the balance sheet of Alameda Research is mainly composed of FTT, a token issued by FTX. However, the liquidity of FTT is not ideal, which has raised investors’ concerns that Alameda may encounter a liquidity crisis.

This news is bound to lead to hyperinflation of the exchange’s native token, FTT. While FTX native token FTT has fallen 71.6%, CoinGecko showed, and the firm’s net crypto asset holdings have plunged 83% in just the past two days.

In the long run, the crypto industry is expected to build a better system using DeFi and self-custody wallets, not relying on third parties. Everything can be publicly audited on-chain.

Analysis suggests the weakness in cryptocurrency exchange FTX this time may provide short-term benefits to other exchanges such as Coinbase. Still, FTX’s liquidity risk has also raised concerns about the overall vulnerability of the industry. Retail investors may consider moving assets to private wallets if the centralized exchange problem persists.

Image source: Shutterstock


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