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Coinbase's 10-Q update: users' crypto asset could be subject to bankruptcy claim

44 points| donsupreme | 3 years ago |twitter.com

26 comments

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[+] darkteflon|3 years ago|reply
People are really surprised by this? You should definitely assume that crypto exchanges and other crypto intermediaries of all stripes do not hold your crypto in a bankruptcy-remote structure.
[+] Ekaros|3 years ago|reply
Not solely your keys, not your coins... After Mt. Gox it should be clear to anyone that unless you hold your own coins on your own you don't really guarantee them.
[+] uejfiweun|3 years ago|reply
Wow. I feel like this is the sort of thing that could precipitate a run.
[+] daenz|3 years ago|reply
Page 83[0]

0. https://d18rn0p25nwr6d.cloudfront.net/CIK-0001679788/89c60d8...

[+] fullshark|3 years ago|reply
> As of March 31, 2022, we held $256 billion in custodial fiat currencies and cryptocurrencies on behalf of customers. Supported crypto assets are not insured or guaranteed by any government or government agency. We have also entered into partnerships with third parties, such as with the Centre Consortium, as a reseller of USDC, where we or our partners receive and hold funds for the benefit of our customers.

...

> Any failure by us or our partners to maintain the necessary controls or to manage customer crypto assets and funds appropriately and in compliance with applicable regulatory requirements could result in reputational harm, litigation, regulatory enforcement actions, significant financial losses, lead customers to discontinue or reduce their use of our and our partners’ products, and result in significant penalties and fines and additional restrictions, which could adversely impact our business, operating results, and financial condition. 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.

[+] smokey_circles|3 years ago|reply
... obviously?

It's an asset (for some reason). That's what happens to assets when you file bankruptcy.

What do you think happens when a bank collapses? Your money is magically protected?

[+] Melting_Harps|3 years ago|reply
As said many times: Not your keys, not your coins!
[+] alligatorplum|3 years ago|reply
Would this also apply to other crypto exchange platforms like Binance and Kraken? or is this something only applicable to Coinbase?
[+] aaaaaaaaata|3 years ago|reply
In all cases, you're wholly liable to whomever holds the private keys to the wallet that holds the tokens.
[+] panda88888|3 years ago|reply
What about the cash balance? Is it also subject to seizure if Coinbase goes bankrupt?
[+] klyrs|3 years ago|reply
I truly don't understand why people are so upset about this. If you're claiming bankruptcy but sitting on a fat crypto wallet, why should it not be subject? Your bank isn't going to hide assets for you, why would any other legitimate business?
[+] daenz|3 years ago|reply
This isn't about an individual declaring bankruptcy. It's about Coinbase declaring bankruptcy, and users' wallets being used to pay Coinbase's debts. That's why people are upset.
[+] xiphias2|3 years ago|reply
The difference is like storing money in a physical safe where you still own the values, vs on a bank account where you are a creditor.

People would prefer to store crypto in the first type of institution.