Coinbase halts Bitcoin Cash transactions amidst accusations of insider trading
Illustration by Alex Castro / The Verge
Coinbase has launched an internal probe to identify whether its employees engaged in insider trading of Bitcoin Cash shortly before the cryptocurrency was officially introduced to the exchange yesterday. Increased trading led to a spike in Bitcoin Cash’s valuation, and just four hours after its introduction, Coinbase suspended trading of the digital currency.
Coinbase’s ethics policy prevents employees from “trading on ‘material non-public information,’ such as when a new asset will be added to our platform,” wrote Coinbase CEO Brian Armstrong in a Medium post today. That includes sharing that information with friends and family. In the hours before Coinbase added Bitcoin Cash to its exchange, the price of the cryptocurrency had already begun to rise. The price for a single Bitcoin Cash coin soared past $8,000, or more than double its price a day earlier.
Armstrong warned, “If we find evidence of any employee or contractor violating our policies — directly or indirectly — I will not hesitate to terminate the employee immediately and take appropriate legal action.”
Coinbase’s swift shutdown of Bitcoin Cash support came in the midst of many on Twitter raising suspicions last night about the unusual spike of Bitcoin Cash prices.
Back in August, bitcoin split into two, creating Bitcoin Cash, in what’s called a “hard fork.” The fork was backed by one bitcoin group that wanted to combat bitcoin’s high transaction fees and the size limit that made mining larger blocks of data invalid. Bitcoin users who controlled their own private keys benefited from the split by keeping the bitcoin they had along with an extra amount of Bitcoin Cash.
When the fork occurred, several trading platforms like CEX.io offered support for the new currency. But to users’ chagrin, Coinbase rejected Bitcoin Cash, with the company’s director of communications writing in a Medium post that “it is hard to predict how long the alternative version of bitcoin will survive.”
Now, Coinbase has decided to enable support for Bitcoin Cash, which has become the third largest cryptocurrency after Bitcoin and Ether in terms of market cap. Although Bitcoin Cash has seen less extreme growth in valuation than Bitcoin, which skyrocketed past $15,000 per coin this month, Bitcoin Cash’s value has steadily risen. It’s currently worth around $4,154, up from $1,500 last month.
We’ve reached out to Coinbase for clarification and will update this story when we hear back.
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