Coinbase CEO denies selling ‘paper Bitcoin’ to BlackRock and claims cbBTC

Coinbase founder and CEO Brian Armstrong has denied speculation that the company sold paper Bitcoin to BlackRock without maintaining 1:1 backing.

The allegations have sparked debate in the crypto community, with some accusing Coinbase of lacking transparency in its Bitcoin holdings.

Brian Armstrong dispels rumours

In a statement on X to crypto analyst Tyler Durden, Armstrong explained that the minting and burning of Bitcoin for BlackRock’s local Bitcoin ETF is conducted transparently and on-chain. Durden had shared data from Cryptoquant that showed Coinbase was the biggest buyer and seller at both market highs and lows.

He further hinted that the exchange allowed BlackRock to borrow BTC without providing collateral. And with BlackRock holding one of the world’s largest Bitcoin holdings, the analyst suggested the two companies could potentially benefit from the cryptocurrency by monitoring its ups and downs.

However, Coinbase’s CEO has denied the allegations. He referred to Durden’s concerns as “the norm” for institutional clients, noting that Deloitte audits Coinbase annually, with the results publicly available for verification.

He also noted that the company cannot share the wallet addresses of its institutional clients, citing privacy concerns. “I doubt our institutional clients want people dusting off all their addresses, and it’s not our place to share for them,” he said.

Bloomberg analyst Eric Balchunas also weighed in on the controversy, denying the latest claims. He wrote to X:

“I understand why these theories exist and people want to scapegoat ETFs. Because it’s too unthinkable that native HODLers could be the sellers. But they are.”

He also added that ETFs like the one offered by BlackRock have helped stabilize the price of bitcoin during periods of market volatility.

cbBTC Controversy

Armstrong was also forced to address issues surrounding his company’s embattled Bitcoin product, cbBTC. He admitted that cbBTC is backed by a centralized custodian, which in this case is Coinbase itself.

However, Durden responded to Armstrong’s claim with an apparent quote from BTC’s anonymous creator, Satoshi Nakamoto, saying, “Don’t trust, verify.”

Another community member expressed similar concerns, saying: “They will not provide any proof of reserves for the BTC they claim to have, nor any proof of support for their new paper BTC called cbBTC.”

Tron (TRX) founder Justin Sun had previously criticized Coinbase’s new offering, claiming it lacked proof of reserve, lacked audits and could allegedly freeze users’ funds.

The launch of cbBTC has put Coinbase in direct competition with BitGo’s Wrapped Bitcoin (WBTC), which will soon be operated by Justin Sun’s company. As such, some observers have speculated that the recent allegations could be tied to a broader battle for market share between these two key players in the derivatives space.

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