Coinbase (COIN) wants to take the lead.
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 is not about to run out of cash.
FTX.com and Binance announced on November 8 that the second would acquire the first which is facing a liquidity crunch. The transaction was made in a hurry since Binance says that its finalization is pending the conduct of due diligence. Basically, the two 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 only accounted for 5% of FTX.com's revenue.
"This afternoon, FTX asked for our help," Binance CEO and co-founder Changpeng Zhao said on Twitter. "There is a significant liquidity crunch. To protect users, we signed a non-binding LOI, intending to fully acquire http://FTX.com and help cover the liquidity crunch. We will be conducting a full DD in the coming days."
The transaction was 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 fine. Assets are fine," Bankman-Fried said.
Coinbase Shares Down Almost 11%
As the latest developments show, things are moving fast. This is why investors are wondering if the sector is not hiding other corpses because Bankman-Fried was the white knight of the crypto industry during the liquidity crisis which forced many firms to file for Chapter 11 bankruptcy during the summer.
Investors seem to want to say that if FTX.com faces a credit crunch this could be the case for many crypto firms. The shadow of suspicion therefore hovers over the sector.
The FTX-Binance deal sent cryptocurrency prices and shares of crypto-related firms plummeting. Coinbase shares lost 10.8%.
"Today, Coinbase and our customers are not in any direct danger of liquidity or credit risk," said Chief Financial Officer Alesia Haas in a blog post. "Regardless of whether the Binance/FTX transaction completes, we have very little exposure to FTX and we have no exposure to its token, FTT. Currently we have $15 million worth of deposits on FTX to facilitate business operations and client trades. We have no exposure to Alameda Research, and we have no loans to FTX."
'There Can't Be a Run on the Bank'
Alameda Research is a trading platform owned by Bankman-Fried. It has close ties with FTX. As for FTT, it is the cryptocurrency issued by FTX. According to Coindesk, the balance sheet of Alameda is composed mainly of FTT, in other words if the value of FTT collapses, Alameda and by extension the other Bankman-Fried companies find themselves short of cash.
Coinbase says its public company status sets it apart from its rivals because it forces it to be more transparent.
"As a publicly traded company in the US, we’ve also built our business in a way that allows us to be transparent about our track record, balance sheet strength, and effectively and prudently manage risk for our customers and ourselves," Haas said.
"There can’t be a 'run on the bank' at Coinbase," the executive continued. "We have no gating for client loan recalls or withdrawals."
Coinbase also believes that what has just happened between Binance and FTX calls for the establishment of a clear regulatory framework.
"We believe that what’s happening now is yet another example of why strong, clear regulatory standards are so important," Haas said.
