Coinbase CEO Says ‘We Don’t Risk Bankruptcy’

coinbase (coin) You are on the line of fire.

Popular cryptocurrency exchanges are at the heart of the cryptocurrency market, which, like the stock market, is being hit by growing fears of investors over a slowdown in growth.

In the company’s first quarter results 10-Q document The Securities and Exchange Commission has the following information.

“Since crypto assets in custody may be considered assets of a bankruptcy estate, crypto assets that we hold on behalf of our clients in the event of bankruptcy may be subject to bankruptcy proceedings, and such clients may be treated as follows: Our regular unsecured creditors,” Coinbase wrote.

Retail customers are the final stage of bankruptcy.

Ordinary unsecured creditors are considered to be the biggest losers if a company files for bankruptcy. This means that if Coinbase is to file a lawsuit under the bankruptcy law, customers will have to pay after creditors and shareholders. They can lose money because they are the last in line.

In 10-Q, Coinbase describes this as a “new risk” due to new SEC requirements for public companies holding crypto assets for third parties.

The exchange warns that this requirement means that customers, especially retail investors, may find it more risky to keep their coins on the platform. Coinbase offers its customers an electronic wallet to store their crypto assets. If many customers leave the platform, it could weaken Coinbase financially.

The language and warnings included here have fueled further concerns about cryptocurrencies already being shaken by the falling digital currency prices.

In Wednesday’s last confirmation, Coinbase shares lost nearly a quarter of the market value they held on Tuesday. It is down 84% from its 52-week high near $369 set at the beginning of November.

Coinbase CEO Brian Armstrong felt he needed to intervene and be reassured.

He wrote on Twitter, “Today, in Q10, we’ve got a little bit of noise about what we’re revealing about how we hold our crypto assets.” “Tl;dr: Your funds are safe on Coinbase as always.”

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‘We are not at risk of bankruptcy’

He said there was no risk that Coinbase would file under the bankruptcy law.

“We have no bankruptcy risk, but we have included a new risk factor based on the SEC requirement of SAB 121,” Armstrong said.

Armstrong is confident that to Coinbase customers, it will take additional steps to ensure that the company can provide retail customers the same level of additional protection it provides to Prime and Custody consumers.

“For retail customers, we are taking further steps to update our user terms so that we can provide the same protection to those customers at the Black Swan event,” the CEO said. “We should have put this in place before, so we apologize for that.”

Armstrong later apologized to Coinbase customers, saying the company should have communicated sooner about adding new financial disclosure requirements.

“We should have updated the retail terms sooner and we weren’t informed in advance when this risk disclosure was added,” he said. “A deep apology and a good learning moment as we make a difference for the future.”

“This disclosure is meaningful in that these legal protections have not been specifically tested for crypto assets in courts, and while it is unlikely, the courts are likely to decide in bankruptcy proceedings to consider customer assets as part of the company’s consumers.” ‘ concluded Armstrong.

Armstrong’s explanation and apology may not have completely reassured at least some Coinbase customers who have responded to his comments.

“Does Coinbase not have insurance to protect asset holders?” One user left a comment.

Another said, “Don’t take people’s cryptocurrencies, protect Brian.”

“What other undisclosed risk management has failed?” I asked another Twitter user. “A publicly traded company like you should be good at risk disclosure laws.”


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