Armstrong said in addition to trading restrictions, the policy prohibits communication of material non-public information outside the company, including to friends and family.
While cryptocurrency trading is largely unregulated, the industry is ramping up its government ties and is under increased scrutiny from the US Securities and Exchange Commission, among other financial regulators.
Coinbase was concerned that its own workers had exploited the shift towards Bitcoin Cash and away from Bitcoin after its price skyrocketed. However, traders of the cryptocurrency could have a serious problem on their hands, as the sudden increase in price may have been manufactured.
His comments followed accusations that Coinbase employees may have secretly profited following the launch of Bitcoin Cash - a new form of cryptocurrency which opened for trading on the website on Tuesday (19 December) at higher values than other exchanges. Prior to the public announcement, Bitcoin Cash prices were already surging.
This week's Bitcoin Cash debacle is just the latest example of the volatility and mistrust that continues to plague digital currency markets even as millions of ordinary people are rushing to invest.
Brian Armstrong, co-founder and chief executive of Coinbase, said in a blog post that employees and contractors were prohibited from trading bitcoin cash and disclosing the company's launch plans over one month ago.
Bitcoin cash is trading higher after a slate of announcements from Coinbase. "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", he wrote.
Bitcoin cash was created on August 1 when Hong Kong-based exchange Bitfinex said a minority of bitcoin miners would create a new version of bitcoin to make trading faster and easier. The price that Coinbase displayed was also nearly triple what was being quoted on other exchanges. However, at the time that happened, Coinbase didn't support the new cryptocurrency, so those who used the company's digital wallet didn't receive their tokens.