Brian Armstrong, ETF Experts Shoot Down 'Paper Bitcoin' Rumors

Some online chatter has suggested Coinbase is issuing bitcoin IOUs to BlackRock, which ultimately was manipulating the price of crypto lower.

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• Rumors concerning Coinbase and BlackRock were scuttled by industry experts this week.
• Crypto analyst Tyler Durden had accused the exchange of allowing BlackRock to borrow bitcoin without providing collateral, which would allow for market manipulation.

Macro Impact on Crypto: Fed, China and Global Liquidity

Rumors alleging Coinbase (COIN) was issuing bitcoin IOUs to BlackRock were quickly shut down by industry experts as well as Coinbase CEO Brian Armstrong on Monday.

Over the weekend, well-followed X crypto analyst Tyler Durden accused Coinbase of allowing BlackRock – the issuer behind the largest spot bitcoin exchange-traded fund – to borrow bitcoin without providing collateral, which would allow manipulation of the market and profit from the resulting price swings.

Durden’s allegations came following a post from Tron founder Justin Sun on X, who described Coinbase’s new wrapped bitcoin product (cbBTC) as “trust me” given it lacked Proof of Reserves or audits and could freeze balances at any time.

“Any U.S. government subpoena could seize all your BTC," Sun wrote. "There's no better representation of central bank Bitcoin than this. It's a dark day for BTC."

In response to both allegations, Coinbase's Armstrong explained that the ETFs are minted and burned and settled on chain within one business day and that institutional clients have the option to use trade financing and over-the-counter options before the trades are fully settled.

Durden later deleted his tweet.

“I don’t believe these rumors and conspiracy theories for one second,” James Seyffart, ETF analyst at Bloomberg, told CoinDesk. “It’s another in the long line of bad takes on ETFs.”

Seyffart reiterated the need for more issuers, including BlackRock, to share digital wallet addresses with the public to increase transparency. Crypto-native spot bitcoin ETF issuer Bitwise has done so for both its bitcoin and spot ethereum funds and was applauded for it by industry experts.

Bloomberg senior ETF analyst Eric Balchunas criticized the bitcoin community for blaming the ETFs for the recent selling pressure in the market, “instead of looking in the mirror.”

“[People] who invest in BTC are generally skeptical of [the government] and institutions (which I get),” he wrote in a post on X. However, he said that BlackRock “isn’t playing around” and that the asset manager would “flip out” if Coinbase was “screwing around with their bitcoin.”

Edited by Stephen Alpher.

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CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one ; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.

Helene is a New York-based reporter covering Wall Street, the rise of the spot bitcoin ETFs and crypto exchanges. She is also the co-host of CoinDesk's Markets Daily show. Helene is a graduate of New York University's business and economic reporting program and has appeared on CBS News, YahooFinance and Nasdaq TradeTalks. She holds BTC and ETH.

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Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one ; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.

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