In a swift response, industry insiders and Coinbase CEO Brian Armstrong dismissed rumors surrounding Coinbase’s issuance of Bitcoin IOUs. Crypto analyst Tyler Durden alleged over the weekend that Coinbase had allowed BlackRock, the largest spot bitcoin ETF manager, to borrow the cryptocurrency without collateral, leading to potential market manipulation and profit from price fluctuations. These claims arose following criticism from Tron founder Justin Sun, who raised concerns about Coinbase’s cbBTC product lacking Proof of Reserves or audits, and the ability to freeze balances at any time, dubbing it a representation of centralized Bitcoin.
Armstrong clarified that ETFs are minted, burned, and settled on-chain within one business day, allowing institutional clients to utilize trade financing and over-the-counter options prior to full settlement. The concept of IOU crypto tokens was compared to a debt acknowledgment between two parties, serving as a record of the transaction. Bloomberg’s ETF analyst James Seyffart dismissed the rumors as baseless, emphasizing that issuers like BlackRock aim for transparency by publishing digital wallet addresses. Eric Balchunas, a senior ETF analyst at Bloomberg, criticized the Bitcoin community for attributing recent market pressure to ETFs rather than introspecting.
Balchunas highlighted the skepticism of most Bitcoin investors towards government and institutional entities, noting that BlackRock prioritizes accountability and would not overlook any misconduct by Coinbase and Armstrong concerning Bitcoin.