After shutting its affiliate program, speculations are running high about if Coinbase is going bankrupt or becoming insolvent.
Irrespective of rumours, the exchange has been a leading platform for transfers from Coinbase to MetaMask and Coinbase to PayPal. Coinbase has also been bolstering its new Coinbase listings to give access to new cryptocurrencies to the users. Alongside this, it built an accessible environment for users to stake their crypto.
Moreover, the exchange has been involved in numerous controversies till now, including its recent statements about the exchange using consumer funds as its property if it ever encounters bankruptcy. Let's take a look and solve the burning query; is Coinbase going bankrupt for real or is it just a farce?
Why Are Coinbase Bankruptcy Rumours Swirling?
The ongoing bear market sentiment has resulted in weeding out weak contenders of the crypto market. The Luna crypto crash followed by the Celsius network lawsuit has shaken up the crypto world, leading it to become incredibly sensitive to rumours and speculations.
Coinbase was caught up in a whirlwind of insolvency rumours when the exchange decided to shut off its affiliate program. Some users questioned whether this suspension suggested the exchange could no longer fund these activities.
However, the first Coinbase insolvency rumours came about in May 2022. Here. a Coinbase filing revealed customers were at risk of losing all their crypto if Coinbase went bankrupt.
In addition to this, Bitcoin Historian Kurt Wuckert had also tweeted stating that this could be an indication of Coinbase battling a liquidity crisis, considering the exchange has suspended its affiliate program.
Of course, while Coinbase is planning to shut down its Coinbase Pro division, this is not the whole story. Instead, it plans to merge Coinbase Pro features into the main Coinbase platform through Coinbase Advanced Trade.
Presently, the exchange is battling an intense probe initiated by US Securities and Exchange Commission.
According to Bloomberg, the US SEC suspects Coinbase of allegedly letting Americans trade digital assets and new crypto listings which should've been registered as securities in the first place.
As a result, Coinbase's native token COIN has plummeted 13% and is presently sitting at $56.17.
Coinbase has recently unveiled its Q2 earnings report outlining critical losses worth $1.1 billion
The report further indicates a drop of nearly 60% in terms of revenue.
The drop in revenue has been noted due to the slow crypto trading that is currently prevalent because of the ongoing bear market.
Coinbase Clarifies Its Stance, Says It Wasn't Exposed To Bankrupt Crypto Companies
To address the growing insolvency rumours, crypto exchange Coinbase issued a new blog post. Here, it dismissed rumours of its association with any of the bankrupt companies such as Three Arrow Capital, Celsius, and Voyager.
Coinbase said:
Coinbase had no financing exposure to the groups above [Celsius, 3AC, Voyager, and other similar counterparties]. We have not engaged in these types of risky lending practices and instead have focused on building our financing business with prudence and deliberate focus on the client. Now, more than ever, our leading institutional clients demand a high-quality financing counterparty.
The platform further clarified that it prioritises risk management, and any institutional lending activity conducted at Coinbase is "at the discretion of the customer and backed by collateral, which serves as the first layer of protection against potential default contagion."
In a recent interview with CNBC, Coinbase's CEO shared his opinions on the recent crypto winter, adding that the best marker sentiment may extend up to 12-18 months.
Armstrong later added how the firm is prepared to tackle any given circumstances and is already preparing jew products and services to boost its revenue.
Armstrong further stated that the exchange will be focusing on a subscription-based revenue model instead of depending solely on its trading fee revenue
Coinbase Dismisses Bankruptcy Rumors
Coinbase's CEO Brian Armstrong has confirmed multiple times that the company is not in a position of going bankrupt and possesses enough capital that secures its activities.
Earlier, Armstrong clarified that there is no risk of bankruptcy associated with Coinbase amid a black Swan event, such as the upcoming Mt Gox Bitcoin Payout.
Posting on Twitter, he said: "We have no risk of bankruptcy."
Later on, the exchange further reiterated similar sentiments, adding that it had no relations with these bankrupt companies.
"Our goal is to be the safest, easiest, and most trusted bridge to the cryptoeconomy," it said. "We offer the most secure, comprehensive, and scalable products and services, including financing, and our multifaceted risk management programs are designed to protect our clients, our shareholders, and the broader cryptoeconomy."