Coinbase founder and CEO Brian Armstrong has denied speculations that the company has sold paper Bitcoin to BlackRock without maintaining a 1:1 backing.
The allegations have caused debate in the crypto community, with some accusing Coinbase of lacking transparency in its Bitcoin reserves.
Brian Armstrong Dispels the Rumors
In a statement on X addressing crypto analyst Tyler Durden, Armstrong explained that the minting and burning of Bitcoin for BlackRock’s spot Bitcoin ETF are conducted transparently and on-chain. Durden had shared data from Cryptoquant showing that Coinbase was the biggest buyer and seller at both market highs and lows.
Additionally, he implied that the exchange was letting BlackRock borrow BTC without providing collateral. And with BlackRock having one of the largest Bitcoin holdings in the world, the analyst suggested that the two firms could potentially be profiting off the cryptocurrency by controlling its dips and rises.
However, the Coinbase CEO has refuted the allegations. He referred to Durden’s concerns as “the norm” for institutional clients, emphasizing that Deloitte audits Coinbase annually, with the results publicly available for verification.
He also pointed out that the company cannot share its institutional clients’ wallet addresses, citing privacy concerns. “I doubt our institutional clients want people dusting all their addresses, and it’s not our place to share for them,” he stated.
Bloomberg analyst Eric Balchunas also weighed in on the controversy, denying the latest claims. He wrote on X:
“I get why these theories exist and people want to scapegoat the ETFs. Because it is too unthinkable that the native HODLers could be the sellers. But they are.”
He also added that ETFs such as that offered by BlackRock have helped stabilize bitcoin’s price during periods of market volatility.
cbBTC Controversy
Armstrong was also forced to address issues concerning his company’s wrapped Bitcoin product, cbBTC. He admitted that cbBTC is backed by a centralized custodian, which in this case is Coinbase itself.
However, Durden responded to Armstrong’s assertion with an apparent quote from BTC’s anonymous creator Satoshi Nakamoto that read, “Don’t trust, verify.”
Another community member voiced similar concerns, saying: “They will not provide any proof of reserves for the BTC they claim they have, nor any proof of backing for their new paper BTC called cbBTC.”
Earlier, Tron (TRX) founder Justin Sun had lambasted Coinbase’s new offering, claiming it had no Proof of Reserve, lacked audits, and could allegedly freeze user funds.
The launch of cbBTC has put Coinbase in direct competition with BitGo’s Wrapped Bitcoin (WBTC), soon to be managed by Justin Sun’s firm. As such, some observers have speculated that the recent accusations could be tied to a broader battle for market share between these two key players in the derivatives space.
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