Coinbase ushered in an eventful period. Can the crisis survive?

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Original title: coinbase crisis

The Thanksgiving holiday in the United States is coming, but Coinbase is not happy at all.

On November 26, under the latest guidance from the US Commodity Futures Trading Commission (CFTC), Coinbase closed margin trading.

In addition, this weekend the US “New York Times” will publish negative reports about Coinbase.

Coinbase seems to usher in an “eventful season.”

Regulatory restrictions on Coinbase

On November 25, Coinbase blog announced that in response to the CFTC’s new guidance, we will close our margin trading products. Margin trading will stop at 6 a.m. Beijing time on November 26.

Adam Cochran, partner of Metacartel Ventures, said: “This is a huge blow to the U.S. crypto industry and may affect prices because it will drain a lot of money.”

At the same time, the U.S. Treasury Department plans to introduce new regulations that require financial institutions like Coinbase to collect recipient/owner information of non-custodial wallets, verify their identity, and then send withdrawals to non-custodial wallets.

In this regard, Coinbase CEO Brian Armstrong said bluntly: “If this cryptocurrency regulation is introduced, it will be a terrible legacy and will have a long-term negative impact on the United States.”

Brian Armstrong posted a large paragraph on Twitter explaining the difficulty of this regulation.

First, smart contracts are not necessarily held by certifiable individuals or companies. This is a new type of receiver, without any direct target in traditional financial services.

Second, in emerging markets, it is difficult or impossible to collect meaningful “know your customer” information. Some people in emerging markets are in poverty and may not have any permanent address or government ID.

Finally, many recipients (in the US or abroad) who value their financial privacy may not want to upload more identification documents to various companies at all.

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If the regulations are truly implemented, Coinbase and its users will be impacted. If Coinbase wants to operate its business in the United States smoothly, it must comply with the new regulations of the US Treasury Department. However, the consequence of this regulation is that the number of transactions from encrypted financial institutions to non-custodial wallets may be reduced, and users who want to conduct transactions will inevitably turn to those unregulated crypto service companies outside the United States. This is for the U.S. crypto industry ecology. Extremely disadvantageous.

Coinbase is well aware of this and has teamed up with a number of US crypto companies and investors to write to the US Treasury Department to express their concerns. The specific situation is still unknown, but it is foreseeable that this will be another game between the US encryption industry and regulatory agencies.

However, the regulations may not be passed because the term of the Ministry of Finance is coming to an end. As Adam Cochran mentioned in the comments “Hail Mary”. This term comes from rugby and refers to a desperate long pass towards the opponent’s end zone, which usually appears in the final stage of the game. The U.S. Department of Treasury and Secretary Numchin are eager to use the last time to strengthen the control of the crypto industry. If the regulations fail to “touchdown”, then U.S. crypto financial institutions such as Coinbase are likely to “escape.”

Fire in Coinbase’s inner courtyard

Just a few hours after Brain Armstrong posted the long post, the Coinbase blog exposed negative news again.

Coinbase blog post stated: “The New York Times” plans to publish negative reports on Coinbase in the next few days, and the report is expected to be published on Sunday.

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Coinbase said in the article that it has paid attention to the New York Times report. The New York Times reporter Nathaniel Popper has been contacting current and former employees in the past few weeks.

At the same time, Coinbase pointed out that it has completed the investigation of the allegations in the article. The statement stated: The article may claim that some black employees and contractors have lodged complaints with the company, but only 3 of them lodged complaints while working at Coinbase.

All allegations have been thoroughly investigated. One was through internal investigations, and the other two were conducted by independent third-party investigators. None of them found any evidence of wrongdoing. Finally concluded that these allegations have not been confirmed.

It is worth noting that the “New York Times” reporter has extended the tentacles of the investigation to the current Coinbase employees. These employees are insiders of the current operating conditions of Coinbase, and they will provide the latest internal situation of Coinbase in the process of communicating with reporters, which may entrain personal emotions.

In the style of the “New York Times” independent investigation, reporters may have grasped part of Coinbase’s undisclosed content.

In addition, black employees will be mentioned in the article. After the vigorous “Black Lives Matter” campaign, the social sentiment generated by reports of this group is also an unknown factor.

Regardless of the accusations against Coinbase in the final report published by the New York Times, it is already a certainty that these accusations will be made public. “The New York Times”‘s global influence is self-evident, and the negative news released will undoubtedly give Coinbase a heavy blow.

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Although it is not clear who the former employee provided information to the New York Times reporter, the accusation of the former employee has to be reminiscent of the Coinbase “resignation wave” from September to October.

At the end of September, Coinbase informed employees that anyone who is dissatisfied with the company’s declared “apolitical” mission can leave with a generous exit plan.

In a blog post written by Brian Armstrong, it was mentioned that as of October 8, 60 employees had chosen to leave Coinbase, and the number of employees who had left was about 5%.

5% of employees leave in a short period of time, which is not a small percentage for a company. When these employees leave, they may take some negative evidence from Coinbase.

Among these dissatisfied employees is Dan Yoo, vice president of business and data at Coinbase, who proposed to leave Coinbase on October 10.

However, Brian Armstrong was not worried that the employee’s departure would adversely affect Coinbase.

He said: I am proud of the number of crypto startups founded by former Coinbase employees. We even provided them with funding through Coinbase Ventures. The increasing number of crypto startups means that we are getting closer and closer to establishing the crypto economy, even though these startups are in a competitive relationship with Coinbase.

It is not known when the sword of Damocles of the US regulators will hang down, nor is it known how the staff union evaluated Coinbase in the interview. After the Thanksgiving holiday, Coinbase still has many problems waiting for management to deal with.