Coinbase CEO Brian Armstrong: FTX Event Won't Happen to Coinbase

Coinbasae founder Brian Armstrong. (Photo; Doc. Periodical Market)

JAKARTA – In the midst of the news of the two leading crypto giants, Binance and FTX, Coinbase officials recently explained that the FTX incident will not be experienced by the company. This was stated by the founder and CEO of crypto exchange Coinbase, Brian Armstrong.

Furthermore, Armstrong revealed the "events" surrounding FTX appear to stem from risky business practices that Coinbase does not engage in. He also expressed sympathy for everyone involved in the FTX situation - especially those customers who could potentially lose funds.

As of early Tuesday, FTX appears to have stopped processing withdrawals for hours, and on-chain data suggests that is still the case. At the same time, FTX boss Sam Bankman-Fried tries to reassure his customers by saying that the company's assets are "fine".

However, the following day the CEO of FTX confirmed that the company was caught in a "liquidity crisis" from overwhelming withdrawal requests, and needed Binance's support to control it to protect consumer funds.

“This incident appears to be the result of risky business practices, including conflicts of interest between closely related entities, and misappropriation of customer funds (lending user assets)", commented Coinbase CEO Brian Armstrong.

In contrast, Armstrong explained that the crypto trading platform Coinbase does not touch customer funds once they are deposited unless directed to do so by the customer.

The exchange has clarified this in previous statements, including after the downfall of Celsius, Voyager, and Three Arrows Capital. Each company lent customers assets to generate returns with CeFi and DeFi institutions but was caught in a series of infectious bankruptcies following Terra's collapse in May.

Just as Armstrong said at the time that Coinbase had no exposure to these companies, he clarified Tuesday that Coinbase has no exposure to FTT, FTX, or its sister company Alameda. FTT has collapsed 73% in the last 24 hours – the token Alameda reports have massive exposure.

Engage in Risky Practices

Coinbase has never issued a similar exchange token and has publicly audited its finances to ensure customers that their funds are safe. Armstrong believes that part of the problem stems from the lack of clear regulatory certainty in the US, which has spurred 95% of crypto trades to thrive overseas. These offshore companies engage in "more opaque and riskier business practices."

“We must continue to work with policymakers to create reasonable regulation for a centralized exchange/custodial in each market (as we have been doing for some time), but then we need to see the level of playing field being enforced, which has not been the case to date", Armstrong said as reported by CryptoPotato.

In the long term, Armstrong said that decentralized finance would help reduce the risks associated with trusted third parties, as all activity would be publicly auditable on-chain.

Despite all that, the events experienced by the US crypto company, FTX, have affected the decline in the crypto market. These conditions also dragged the price of Bitcoin to a level below 20 thousand dollars per BTC.