Coinbase Wants You to Think It's Immune to FTX Contagion. Here's Why It's Not.
Number of the Week: $3.1 billion (explanation below)
Coinbase Wants You to Think It's Immune to FTX Contagion. Here's Why It's Not.
It’s been a sterling week for scandal connoisseurs. Particular highlights include fallen crypto god Sam Bankman-Fried’s manic “interview” with Vox writer Kelsey Piper, in which he disavowed just about everything he ever stood for except greed; especially juicy was his concise “fuck regulators” formulation. Then there was newly minted FTX CEO John Ray, announcing that he had never seen “such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here.” And he was hired to clean up Enron!
From the moment FTX’s blood hit the water, competing exchanges have been trying to signal that they are the safe and reliable place to buy and sell cryptocurrency, sometimes with comic results. In a coup of bad timing, for example, Binance announced this week that it is launching an “exclusive, multi-year partnership” with the soccer star Cristiano Ronaldo, at the precise moment that Ronaldo was giving a career-ending interview to Piers Morgan.
Not to be outdone, on Thursday Coinbase took out a full-page ad in The Wall Street Journal, never mentioning FTX by name, but lamenting that “millions of people put their money—and trust—with people that didn’t deserve it.” On the face of it, Coinbase would appear to be able to capitalize on FTX’s collapse. The company has spent years trying to position itself as the safe, reliable crypto exchange that plays by the rules, however reluctantly. It is headquartered in San Francisco, not in the Bahamas like FTX or basically nowhere, like Binance. Since April of 2021, it has been a publicly traded company, subject to all the power of federal regulators and the discipline of the market. It holds customers’ assets 1:1, which sounds pretty elementary but given what we’ve learned about FTX, it matters.
But the “trust us” propaganda can’t undo the fact that Coinbase is inextricably caught up in the FTX mess and its long-term effects on the crypto market.