The most popular platform for trading cryptocurrencies and other digital assets in the United States wants to be proactive and not let speculation dominate its news.
After the unexpected debacle of FTX.com, one of its big rivals, Coinbase wants to reassure investors. The company says it’s not about to run out of cash.
FTX.com and Binance announcement on November 8 that the second would redeem the first who is facing a liquidity bite. The transaction was carried out in a hurry since Binance specifies that its finalization is awaiting the conduct of due diligence. Basically, both companies moved quickly to try to avoid chaos and a general panic.
The details of the operation were not given except that the American subsidiary of FTX is not part of the transaction. But FTX.US was only 5% of FTX.com sales revenue.
“This afternoon, FTX asked for our help,” Binance CEO and co-founder Changpeng Zhao tweeted. “There is a significant liquidity crisis. To protect users, we have signed a non-binding letter of intent, intending to fully acquire http://FTX.com and help cover the liquidity crisis. liquidity. We will be doing a full DD in the next few days.”
The transaction came as a shock to the entire crypto industry as the day before Sam Bankman-Fried, the founding CEO of FTX still claimed that the financial health of the company was solid.
“FTX is doing well. Assets are doing well,” Bankman-Fried said.
Coinbase shares nearly 11%
As the latest developments show, things are changing rapidly. This is why investors are wondering if the sector is not hiding other corpses as Bankman-Fried was the white knight of the crypto industry during the liquidity crisis that forced many companies to file for bankruptcy. 11 during the summer.
Investors seem to be saying that if FTX.com faces a credit crunch, so could many crypto firms. The shadow of suspicion therefore hangs over the sector.
The FTX-Binance deal has caused cryptocurrency prices and shares of crypto-related companies to plummet. Coinbase shares lost 10.8%.
“Today, Coinbase and our customers face no direct liquidity or credit risk,” Chief Financial Officer Alesia Haas said in a statement. blog post. “Whether the Binance/FTX transaction completes or not, we have very little exposure to FTX and we have no exposure to its token, FTT. Currently, we have $15 million in deposits on FTX to facilitate trading commercial and client transactions. We have no exposure to Alameda Research, and we have no loans to FTX.”
“There can be no run on the bank”
Alameda Research is a trading platform owned by Bankman-Fried. He has strong ties to FTX. As for FTT, it is the cryptocurrency issued by FTX. According to Coindesk, the balance sheet of Alameda is made up mostly of FTT, meaning if the value of FTT plummets, Alameda and by extension the other Bankman-Fried companies run out of cash.
Coinbase says its public company status sets it apart from its rivals because it requires it to be more transparent.
“As a publicly traded company in the United States, we have also built our business in a way that allows us to be transparent about our track record, the strength of our balance sheet, and to effectively and prudently manage risks for our clients. and for ourselves,” Haas said. .
“There can be no ‘run on the bank’ at Coinbase,” the executive continued. “We don’t have a hold for customer loan recalls or withdrawals.”
Coinbase also believes that what just happened between Binance and FTX calls for a clear regulatory framework.
“We think what’s happening now is another example of why strong and clear regulatory standards are so important,” Haas said.