Rumors circulating that Coinbase had issued Bitcoin IOUs, particularly in connection with BlackRock’s involvement, have been swiftly debunked by industry experts and Coinbase CEO Brian Armstrong. The allegations, which emerged over the weekend, suggested that Coinbase was engaging in market manipulation by allowing BlackRock to borrow Bitcoin without collateral, a claim fiercely denied by Armstrong and other crypto analysts.
The Accusations and Coinbase’s Response
Crypto critic Tyler Durden accused Coinbase of enabling BlackRock, which manages the largest spot Bitcoin ETF, to borrow Bitcoin under questionable circumstances. He claimed that the borrowing was done without collateral, potentially leading to profits through price manipulation. These accusations gained traction following a critical post by Tron founder Justin Sun, who took issue with Coinbase’s new wrapped Bitcoin product, cbBTC. Sun pointed out that the product lacked Proof of Reserves or audits and claimed it could allow Coinbase to freeze balances at will.
Sun expressed his concerns, stating:
“Any U.S. government subpoena could seize all your BTC. There’s no better representation of central bank Bitcoin than this. It’s a dark day for BTC.”
In response, Brian Armstrong clarified that any ETFs managed by Coinbase are minted, burned, and settled on-chain within one business day. He emphasized that institutional clients have access to trade financing and over-the-counter options before the trades are fully settled. Following Armstrong’s detailed explanation, Tyler Durden retracted his allegations, removing his tweet.
Understanding the IOU Token Concept
The confusion also stemmed from misunderstandings about the nature of IOU tokens. An IOU token is similar to a traditional IOU notice, signifying indebtedness between two parties. For instance, if someone lends Bitcoin to a friend, an IOU token may be issued as proof of the debt, remaining in the lender’s wallet until the loan is repaid.
Experts Weigh In and Debunk Conspiracy Theories
ETF analysts and experts were quick to dismiss the allegations as unfounded conspiracy theories. Bloomberg ETF analyst James Seyffart noted that BlackRock, as a responsible institution, publishes digital wallet addresses for added transparency, a practice also followed by other crypto-native spot Bitcoin ETF issuers, including Bitwise.
Eric Balchunas, Bloomberg’s senior ETF analyst, expressed frustration over the Bitcoin community’s tendency to blame external factors, like ETFs, for market fluctuations rather than examining internal market dynamics. Balchunas emphasized that BlackRock, a major asset manager, takes compliance and transparency seriously. He suggested that BlackRock would not overlook any potential misconduct from Coinbase or its CEO, Brian Armstrong.
In conclusion, the rumors surrounding Coinbase’s alleged involvement in issuing Bitcoin IOUs have been effectively debunked. Industry leaders, including Armstrong, Seyffart, and Balchunas, have provided clarifications that reaffirm Coinbase’s commitment to transparency and proper handling of Bitcoin-related products.
