Coinbase warns users that their crypto assets could become company property in case of bankruptcy | tech news

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This week is probably the worst, if not one of the worst weeks for crypto investors. The crypto markets are now getting more and more shaky by the hour. Just as investors are rocked by the collapse of the Terra Luna stablecoin and Terra Token, Coingbase, one of the largest cryptocurrency exchanges, has just dropped another bombshell revelation.

Coinbase warns its users against losing their crypto holdings if the company goes bankrupt. Coinbase warned its customers that their crypto holdings could be viewed as general unsecured assets during bankruptcy proceedings.

The disclosure was made in the company’s earnings report for the first quarter. This was the first time Coinbase even mentioned the risk factor. It also noted that Coinbase held $256 billion in fiat currencies and virtual coins.

Coinbase said that “the crypto assets we hold in custody on behalf of our customers could be the subject of bankruptcy proceedings and those customers could be treated as our general unsecured creditors.” Below is an excerpt from the report.

“Because custodial crypto-assets may be considered property of a bankruptcy estate in the event of bankruptcy, The crypto assets that we hold in custody on behalf of our clients could be the subject of bankruptcy proceedings and such clients could be treated as our general unsecured creditors.”

The crypto trading company also said, “Our failure to protect and manage our customers’ fiat currencies and crypto assets could adversely affect our business, operating results and financial condition.”

Crypto enthusiasts have for many years touted the decentralized movement as a way to give ordinary people complete control and ownership of their finances without the intervention of the central financial authority. Now this revelation adds to the list of things to worry about on top of losing their crypto assets to hackers.

As The Wall Street Journal also noted, “Cryptocurrency trading platforms may look and feel like regular brokerage apps to everyday users, but regulators have long warned that they lack the oversight and investor protections built into traditional financial services.” “

Meanwhile, Coinbase stock fell more than 23% following the earnings report. Coinbase CEO Brian Armstrong tried to reassure users by saying that there is currently no risk of bankruptcy. In a post on Twitter Tuesday night, Brian told users their funds were safe and apologized for not communicating that risk more openly when adding it.

“1/ There is some noise about a disclosure we made in our 10Q today about how we hold crypto assets. Tl;dr: Your funds are safe with Coinbase as they always have been,” Armstrong tweeted.


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