Coinbase cbBTC is currently experiencing transparency issues due to Justin Sun’s concerns. Analysts remain optimistic about the reserve’s integrity due to BlackRock’s support.
Concerns regarding the reserve transparency of Coinbase cbBTC have been exacerbated by its introduction on the Base network.
After Justin Sun identified the absence of Proof-of-Reserve (PoR) for the new product, these concerns gained support. Bloomberg senior ETF analyst Eric Balchunas has defended the exchange’s integrity, citing BlackRock’s involvement as a reason for trust in the initiative despite this.
However, with the community’s increasing skepticism, can BlackRock‘s support reestablish trust in cbBTC?
BlackRock backing guarantees Coinbase cbBTC Reserve
Eric Balchunas, a senior Bloomberg ETF analyst, has dismissed concerns regarding the transparency of Coinbase cbBTC reserves in an X post.
In his most recent social media post, he contended that BlackRock’s involvement lends credibility to the product of one of the most prominent crypto exchanges.
He clarified that BlackRock, a substantial participant in the financial sector, would not tolerate any mismanagement of Bitcoin reserves by the crypto exchange. Furthermore, investors are further assured by the possibility that any fraudulent activity could contravene the Securities Act of 1933.
Balchunas also observed that the skepticism about new Bitcoin products, particularly ETFs, is rooted in a long-standing distrust of institutions. Balchunas characterized the current apprehensions regarding cbBTC as akin to the criticism that gold ETFs have encountered.
He underscored the importance of institutional involvement, such as that of BlackRock, in maintaining the value of Bitcoin during periods of selling pressure. Conversely, Brian Armstrong, the CEO of Coinbase, explicitly addressed the issue of reserve transparency.
Armstrong recently clarified that the exchange’s institutional clients adhere to this process carefully, and all transactions involving cbBTC are settled on-chain.
He reassured the community that the funds are held in the exchange’s Prime vaults, and trades are typically settled within one business day. In addition, he emphasized that Deloitte conducts an annual audit of the firm, as the crypto exchange is a publicly traded entity.
cbBTC is experiencing a decline due to Criticisms
The discussions result from Justin Sun’s recent expression of prospective concerns regarding Coinbase cbBTC. It is worth noting that the Bloomberg analyst and Brian Armstrong’s recent assurances seem to have dismissed the community’s apprehensions; however, certain users continue to harbor reservations.
On the other hand, despite these most recent assurances, certain community members continue to harbor doubts. One user shared Armstrong’s statement on X, observing that the exchange anticipates users to rely on their word without providing evidence of reserves.
The user compared the crypto exchange’s issuance of “paper Bitcoin” through cbBTC to the FTX collapse, cautioning that it could experience comparable repercussions.
Nevertheless, Balchunas continues to have faith in Coinbase’s operations. He proposed that those critical of cbBTC are simply skeptical of government and institutional involvement in cryptocurrency, a sentiment that has persisted since Bitcoin emerged.
BlackRock’s support may alleviate some of the community’s concerns regarding cbBTC’s transparency, although it is unlikely that they will disappear immediately.
