Coinbase Responds to New York AG’s Crypto Exchange Inquiry

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Coinbase has formally responded to New York Attorney General Eric Schneiderman’s cryptocurrency exchange inquiry, and the San Francisco-based startup elected to share a portion of that response with the public.

The five-page letter, which was drafted by Mike Lempres — Coinbase’ chief legal and risk officer — is an abbreviated version of the one that the company sent to the Office of the Attorney General (OAG), but it nevertheless contains some notable insights into the company’s meteoric growth over the past 18 months.

Lempres wrote that the company has increased the surge transaction capacity of its trading platforms by 1000% over the past two quarters, which he said required a “substantial re-architecting” of the firm’s code base. In the past, Coinbase — along with other major exchanges — has struggled to stay online during periods of intense market volatility.

He also revealed that Coinbase now has more than 300 employees spread across its four offices and nearly 1,000 full-time personnel when including dedicated contractors. Approximately 20 percent of those employees work in the firm’s compliance division, highlighting how rocky the regulatory landscape is for companies operating in this nascent industry.

Coinbase did not provide detailed financial information in the public version of its letter, but it did reveal that its customers have traded more than $150 billion in assets on its platform and “operates as a profitable and self-sustaining business” despite considering itself a growth-stage company.

As CCN reported, the company is rumored to have internally assigned itself an $8 billion valuation, a figure that is approximately $6.4 billion above the formal $1.6 billion valuation it received in August 2017 when it closed a $100 million Series D funding round.

Lempres wrote that the full version of the letter had been transmitted to the AG’s office through an encrypted end-to-end secure file exchange service and requested that the agency provide the data with confidential treatment.

It is not clear whether other exchanges fingered by the OAG’s probe have delivered their formal responses, which the agency said were due in full on May 1.

However, at least one exchange — fellow San Francisco-based trading platform Kraken, which does not serve New York customers — has stated unequivocally that it has no plans to comply with the OAG’s “insulting” request and has criticized other companies for “kowtowing” to regulators.

Featured Image from Coinbase.

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Josiah is a full-time journalist at CCN. A former ancient and medieval literature teacher, he has been reporting on cryptocurrency since 2014. He lives in rural North Carolina with his wife and children. Follow him on Twitter @Y3llowb1ackbird or email him directly at josiah.wilmoth(at)ccn.com.