Coinbase cbBTC: Can BlackRock Backing Restore Community Confidence?

Highlights

Coinbase's cbBTC faces community skepticism over reserve transparency and lack of Proof-of-Reserve.
Bloomberg analyst Eric Balchunas defends Coinbase, citing BlackRock's involvement as a trust factor.
Coinbase CEO Brian Armstrong assures cbBTC transactions are settled on-chain and audited annually.

The launch of Coinbase cbBTC on the Base network has fueled concerns over its reserve transparency. These concerns gained traction after Justin Sun pointed out the lack of Proof-of-Reserve (PoR) for the new product. Despite this, Bloomberg senior ETF analyst Eric Balchunas has defended the exchange’s integrity, citing BlackRock’s involvement as a reason for trust in the project.

But with growing skepticism in the community, can BlackRock’s backing restore confidence in cbBTC?

BlackRock Backing Ensures Coinbase cbBTC Reserve

Senior Bloomberg ETF analyst Eric Balchunas has shrugged off concerns over Coinbase cbBTC reserve transparency in an X post. In his recent social media post, he argued that BlackRock’s involvement adds credibility to the product of one of the top crypto exchanges.

He explained that BlackRock, as a significant player in the financial sector, would not tolerate any mismanagement of Bitcoin reserves by the crypto exchange. In addition, any foul play could potentially violate the Securities Act of 1933, which further reassures investors.

Meanwhile, Balchunas also noted that skepticism around new Bitcoin products, especially ETFs, stems from long-standing distrust of institutions. Comparing the current doubts about cbBTC to the criticism faced by gold ETFs in the past, Balchunas described these concerns as familiar territory.

He emphasized that institutional involvement, such as BlackRock’s, is critical to stabilizing Bitcoin’s value during times of selling pressure. On the other hand, Coinbase CEO Brian Armstrong addressed the reserve transparency issue directly.

Armstrong recently explained that all transactions involving cbBTC are settled on-chain, and the exchange’s institutional clients follow this process rigorously. He assured the community that the funds are stored in the exchange’s Prime vaults, with trades typically settled within one business day. Besides, he also highlighted that Deloitte audits the company annually, as the crypto exchange is a publicly traded entity.

cbBTC Slips Amid Soaring Community Doubts

The discussions stem from Justin Sun raising potential concerns over Coinbase cbBTC recently. Notably, the recent assurances from the Bloomberg analyst and Brian Armstrong appear to have shrugged off the concerns of the community, but some users still remain skeptical.

In other words, some community members remain unconvinced despite these latest reassurances. One user shared Armstrong’s statement on X, noting that the exchange expects users to trust their word without offering proof of reserves. The user drew a comparison to the FTX collapse, warning that if the crypto exchange issues too much “paper Bitcoin” through cbBTC, it could face similar consequences.

Balchunas, however, remains confident in Coinbase’s practices. He suggested that those critical of cbBTC are merely skeptical of government and institutional involvement in cryptocurrency, a sentiment that has persisted since the rise of Bitcoin. While concerns over cbBTC’s transparency are unlikely to fade overnight, BlackRock’s backing may help ease some of the community’s fears.

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Rupam Roy

Rupam is a seasoned professional with three years of experience in the financial market, where he has developed a reputation as a meticulous research analyst and insightful journalist. He thrives on exploring the dynamic nuances of the financial landscape. Currently serving as a sub-editor at Coingape, Rupam's expertise extends beyond conventional boundaries. His role involves breaking stories, analyzing AI-related developments, providing real-time updates on the crypto market, and presenting insightful economic news. Rupam's career is characterized by a deep passion for unraveling the complexities of finance and delivering impactful stories that resonate with a diverse audience.

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