Is it a bad sign for an industry when technical issues and ending a little-known promotional campaign lead to immediate concerns that one of the biggest players in the crypto game is in financial danger? Let me just answer that question: yes, of course it is.
Over the weekend, Coinbase users took to online forums like Reddit to complain that supposed server issues were essentially restricting them from either accessing accounts or withdrawing funds. While some found workarounds by accessing the application programming interface, users reported that even those automatic responses from Coinbase’s user helpline could not give an estimate on when those issues would be resolved. Some had reportedly been trying to deal with these issues for several days.
A spokesperson for Coinbase responded to Gizmodo’s inquiry with: “Coinbase is not halting withdrawals on our platform. We occasionally experience technical issues on our platform, and those are handled with high priority and updated in real-time on our status page.”
Several other exchanges had recently announced they were halting or limiting withdrawals, including big names like Celsius, CoinFLEX, and CoinLoan, just to name a few. Some industry insiders like FTX founder Sam Bankman-Fried have warned that some “third tier” exchanges are likely insolvent and would soon fail. All this uncertainty in the market combined with Coinbase’s recent public silence on these technical issues has led to rampant speculation and fear that something else was going on.
Coinbase is still ranked as one of the larger crypto exchanges, and is ranked second by CoinMarketCap under the exchange Binance based on an average of web traffic, volume, and liquidity. The site lists Coinbase has over 1.9 million weekly visits, though that’s significantly less than Binance (20.9 million) or exchanges like FTX (4.7 million).
On Friday, a report from Insider based on leaked emails showed that Coinbase was “temporarily shutting down” its influencer affiliate program in the U.S. on Tuesday. The program paid social media influencers a small amount for promoting Coinbase. The leaked emails reportedly said there were further plans to relaunch it in 2023, but that news led some analysts to speculate the company was having a iquidity crisis. Supporters of Coinbase were quick to defend the company.
The crypto exchange is just one of many dealing with major financial issues since the start of the so-called “crypto winter.” Coinbase cut over 1,000 employees in June, with CEO Brian Armstrong blaming the crypto crash and too much growth in too small a span.
Last week, Armstrong wrote on the company blog they were trying to rescale operations, saying “many of our internal tools and organizing principles have started to strain or break. So we’ve been digging in to identify the set of changes we need to make to help us succeed at this new scale.” That kind of rescaling also led to the company to cut its Coinbase Pro system.
The company has tried to assuage some users’ concerns that their crypto isn’t safe in Coinbase’s hands. Paul Grewal, the exchange’s chief legal officer, wrote on the company blog July 1 that users’ funds were safe, saying that “there’s never a situation where customer funds could be confused with corporate assets.” The message came after a recent SEC filing made some users concerned the exchange was nearing bankruptcy. Armstrong came out to further say the filing was a new requirement by the SEC.
Some crypto analysts were tentatively excited Monday with the news of a small bounce in trading and in overall investment in crypto. Otherwise news had been going well for Coinbase. The company received regulatory approval to operate in Italy on Monday. According to CNBC, this made Coinbase shares trade at 17% higher by midday at the start of the week.
On the other hand, lawmakers are not finding much to like about the current situation in crypto. Democratic U.S. Senator from Massachusetts Elizabeth Warren told Yahoo Finance on Sunday that not only does Congress have to get its rear in gear, but that the Securities and Exchange Commission “has a responsibility to use its authorities to put guardrails in place and crack down on crypto actors that break the rules.”
Her comments came after a weekend where she and other congressional Democrats wrote a letter to the heads of the Environmental Protection Agency and Department of Energy last week urging them to look at the energy cost for crypto mining.