Coinbase Warns Bankruptcy Could Wipe Out User Funds in Latest 10-Q
Posted on 05/11/2022
In the event the crypto exchange goes bankrupt, Coinbase Global, Inc. revealed, its users might lose all the cryptocurrency stored in their accounts too. Coinbase said in its earnings report that it holds US$ 256 billion in both fiat currencies and cryptocurrencies on behalf of its customers as of March 31, 2022.
In the latest 10-Q, it reads, “Moreover, because custodially held crypto assets may be considered to be the property of a bankruptcy estate, in the event of a bankruptcy, the crypto assets we hold in custody on behalf of our customers could be subject to bankruptcy proceedings and such customers could be treated as our general unsecured creditors. This may result in customers finding our custodial services more risky and less attractive and any failure to increase our customer base, discontinuation or reduction in use of our platform and products by existing customers as a result could adversely impact our business, operating results, and financial condition.”
Coinbase contends that the disclosure was prompted by new SEC guidance, not because of any solvency concerns at Coinbase.
The big selling point for cryptocurrencies is that an individual’s ownership is supposed to be immutable and absolute.
SEC Link: https://www.sec.gov/ix?doc=/Archives/edgar/data/1679788/000167978822000048/coin-20220331.htm.