News Tech: The Wall Street Journal (WSJ) reported on Thursday that cryptocurrency exchange Coinbase (COIN) conducted a $100 million transaction earlier this year as a test of its proprietary trading initiatives.
A company engages in proprietary trading when it trades stocks, bonds, currencies, or commodities using its own funds rather than those of its clients. Such action carries risk and raises the possibility of conflicts of interest for the financial institution should its trades have an impact on the pricing of such assets, which could harm its clients.
According to the report, the exchange engaged at least four Wall Street traders to create a group named Coinbase Risk Solutions (CRS) to trade cryptocurrencies using company funds.
When executives from Coinbase testified before Congress in December, they claimed that the company did not participate in proprietary trading.
Because Coinbase will not profit from short-term rises in the value of the bitcoin being traded, “we do not regard this as proprietary trading.”
By providing services to investors who are still familiarising themselves with digital assets, CRS aims to increase institutional engagement in the cryptocurrency market, according to Coinbase.