Surely you are aware of the earthquake that is shaking cryptocurrencies, with all cryptos plummeting and breaking losing records. In the middle of all this maelstrom there is a company that is having a really bad time: Coinbase.
Coinbase, one of the largest cryptocurrency exchanges, published its first quarter earnings report on Tuesday and included a new clause with its clients, one that completely changes the current paradigm.
It suggests that customers’ cryptocurrencies could be at risk if the exchange were to go bankrupt. However, the company’s CEO tried to reassure customers that “there is no risk of bankruptcy.” But seeing his predictions, it is not that they are too successful.
“Your funds are safe on Coinbase, just like they always have beenBrian Armstrong, Coinbase co-founder and CEO, tweeted Wednesday.We have no risk of bankruptcy, however we do include a new risk factor based on an SEC requirement called SAB 121“.
2/ We have no risk of bankruptcy, however we included a new risk factor based on an SEC requirement called SAB 121, which is a newly required disclosure for public companies that hold crypto assets for third parties. https://t.co/lwmgb1kFtA
— Brian Armstrong – barmstrong.eth (@brian_armstrong) May 11, 2022
The US Securities and Exchange Commission released Staff Accounting Bulletin No. 121 (SAB 121) on March 31, saying the disclosures about the possible risks that come with the provision of a platform for cryptocurrency transactions should be made to better inform customers about your investment decisions.
The new risk factor disclosure, reported by Business Insider, says that:
“Because crypto assets in escrow may be considered property of a bankruptcy estate, in the event of bankruptcy, the crypto assets we hold in escrow on behalf of our clients may be subject to bankruptcy proceedings and such clients may be treated as our creditors. general unsecured“.
This could mean, if we translate it into a simpler language, that in the event of a bankruptcy proceeding customer balances could be considered property of Coinbaseas explained in Business Insider.
Armstrong tweeted that Coinbase has its own crypto wallet for those who prefer to keep their crypto instead of leaving it with the exchange. Cryptocurrency traders worried about losing their holdings also have the option to purchase personal cryptocurrency insurance.
All these movements imply that in Coinbase is covering their backs in case the company goes underto the misfortune of all its clients and investors.
George is Digismak’s reported cum editor with 13 years of experience in Journalism