Coinbase CEO refutes allegations of selling ‘fake Bitcoin’ to BlackRock
On September 15th, Coinbase made headlines amid accusations of a lack of transparency surrounding its Bitcoin holdings. The controversy escalated after the leading crypto custody firm introduced cbBTC, a wrapped BTC derivative utilized in the DeFi sector.
Moreover, some members of the community raised concerns that Coinbase had sold ‘fake BTC’ to BlackRock without proper 1:1 backing. In essence, there were calls for transparency regarding Coinbase’s BTC reserves for cbBTC and BlackRock ETF.
Defending Coinbase’s Position
In response, Coinbase’s founder Brian Armstrong defended the company against these accusations. He clarified that Deloitte conducts annual audits on Coinbase as a publicly traded entity and emphasized the confidentiality of client wallet addresses.
“Deloitte audits us annually as a public company. Our institutional clients value privacy and we respect that by not disclosing their wallet addresses.”
Similar allegations were previously made in May about Coinbase and BlackRock. Despite this, ETF experts like Bloomberg’s Eric Balchunas debunked the claims, attributing the perceived lack of transparency to the ETF structure’s design.
Balchunas also discredited the recent accusations, highlighting that Arkham tracks ETF issuers and their holdings, providing a layer of verification.
Uncertainties Surrounding cbBTC’s Backing
However, Armstrong’s statement on cbBTC raised more questions than it answered. While acknowledging that a centralized custodian safeguards the underlying BTC for cbBTC, some community members demanded a mechanism for verifying the BTC backing.
Transparency is a fundamental aspect of blockchain technology. Despite this ethos, Armstrong’s response regarding cbBTC fell short of expectations. Criticism was voiced by a market observer who remarked,
“Coinbase does not offer proof of its BTC reserves or the backing for cbBTC. Printing excessive paper BTC could lead them down the FTX path.”
With Coinbase’s cbBTC set to rival BitGo’s WBTC, which is undergoing a custody transition to Justin Sun’s company, some of the allegations appear rooted in a struggle for market dominance.
Ultimately, the revelation of Coinbase’s cbBTC backing remains a point of interest for industry stakeholders.