Started by Bitcoin, Nov 10, 2022, 05:55 am
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While discussing what happened to FTX, Brain Armstrong, CEO of Coinbase, bragged that his firm is not vulnerable to that kind of issue. He, however, suggested possible reasons behind FTX’s fallout.
FTX’s insolvency problem is now a hot topic of discussion among the crypto industry’s top players and community members. Could there be lessons to learn from this? However, FTX is not finding it funny as the firm got caught in a web of the financial crisis and overwhelming loss within a few days.
Although CEO Brian sympathized with all parties affected by the FTX challenge, he blamed the firm as the architect of its problem. In his tweet, Armstrong said he feels sympathy toward customers who may be affected by the current situation.
For many hours on November 8, withdrawals on the FTX platform appeared halted. On-chain data indicates that fund withdrawals are still not going through.
Before the withdrawals stopped, Bankman-Fried said via Twitter that FTX’s assets remained untouched and the withdrawal queue was normalizing. However, the following day, the CEO confirmed the firm's liquidity crisis due to too many withdrawal requests. He pleaded for Binance's support to navigate through the problems.
Given the circumstances and FTX’s inability to process customers’ withdrawal requests, Armstrong thinks it is the firm’s fault. The CEO, in his statement, said the event appears to be a result of bad business practices, including conflicts of interest between Binance and FTX.
He maintained that the chief cause of the fallout is the misuse of customers’ funds, which reflects FTX’s inability to process withdrawals.
Armstrong added that such a scenario would not play out in Coinbase, as they would never touch a customer's fund unless permitted by the customer. Coinbase has said this before during the crash of Three Arrows Capital, Voyager, and Celsius Network.
These firms used customers’ assets to provide lending services to generate yield in Centralized and Decentralized finance institutions. However, they got caught up in a web of bankruptcy problems following the Terra crash in May.
In line with Armstrong's comments, Coinbase had no exposure to any of those firms. On Tuesday, the Coinbase CEO clarified that his firm has zero exposure to FTT, FTX, or its affiliated company Alameda.
Recall earliest reports revealed that Alameda was overexposed to FTT in assets holding relative to the token’s market cap. However, the CEO of Alameda denied this. But FTT has dropped 73% currently.
Contrary to FTX, Coinbase does not issue exchange tokens and publicly audits its financials to ensure transparency with customers’ funds. Armstrong believes the lack of a clear regulatory framework in the United States is part of the genesis of the problem.
He advises collaboration with policymakers to ensure the regulation of centralized exchanges. He also said DeFi could help reduce the risk of third-party involvement since activities are publicly updated.
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