Coinbase’s co-founder and CEO, Brian Armstrong, addressed fears about a recent disclosure the company made.
A Coinbase report that declared its losses has gained traction on social media. This disclosure suggests that users are not covered in bankruptcy. Brian Armstrong, Coinbase CEO, stated that funds are secure “as they have always been.”
Coinbase’s first quarter report for 2022 revealed a loss of $430 million. The firm also reported that the number of users who transact on the exchange dropped from 11.4 to 9.2 millions.
After the loss was reported, concerns about bankruptcy protection were raised on Twitter. They quoted lines from the disclosure which stated, “In case of bankruptcy, the crypto assets that we hold for our customers could be subject to bankruptcy proceedings.”
The disclosure also stated that users would be considered “unsecured creditors” if this happens. It was speculated that the coins they held would be company property if Coinbase goes bankrupt.
Armstrong responded to these concerns by stating that there is no risk of bankruptcy for the company and that customer funds remain safe. Armstrong said however that it was unlikely that a court would consider consumer assets in bankruptcy proceedings, “even if it hurt customers.”
Armstrong explained that prime and custodial customers are protected by strong legal protections in the terms of service. These terms also protect assets in the event of bankruptcy. He noted that the team is currently updating their terms in order to provide the same protections for retail customers.
The Coinbase CEO is still bullish despite the negative news surrounding the loss report. Armstrong stated that Coinbase has survived many crypto cycles, including the worst drawdowns, and is therefore “well suited” to continue operating in these difficult waters.
