Coinbase: Clients Could Lose Their Cryptocurrency In Bankruptcy, Panic Evolves
Coinbase, the US cryptocurrency exchange, has revealed declining financial results. However, this was not what caused his customers to panic. Indeed, in a quarterly report submitted to the US stock market policeman, Coinbase explained that users' cryptocurrency could be confiscated in the event of bankruptcy.
While the price of Bitcoin just dropped below the $30,000 mark, for the first time in nearly a year, Coinbase is also finding itself in turmoil. The American cryptocurrency exchange has just published its financial results for the first quarter of 2022.
This is not the time to celebrate, as net income fell to $1.17 billion from $1.6 billion last year at the same time. The same note regarding the total volume of transactions, which decreased to 309 billion compared to 335 billion. Unsurprisingly, the number of monthly active users also decreased from 11.4 million to 9.2 million.
As expected, the company justifies these weak numbers by the decline in the prices of several cryptocurrencies since the beginning of the year, with Bitcoin and Ethereum ahead. These market conditions had a direct impact on our first quarter results. But we have approached these market conditions with insight and preparation, and we remain more excited than ever about the future of cryptocurrency.”
Encryption of users held in bankruptcy
It also specifies that it is nothing but a bad patch, rooted in the cryptocurrency market and price volatility. However, it wasn't Coinbase's sluggish performance that caused customers to panic. In fact, the platform recently submitted a quarterly report to the US Securities and Exchange Commission, the US stock market policeman. In this document, we learn that user cryptocurrencies held by Coinbase “may be considered assets that are subject to bankruptcy proceedings and customers can generally be treated as unsecured creditors.”
In other words, creditors can consider the customer's assets stored by Coinbase as the property of the company. In the event of bankruptcy, these cryptocurrencies can thus be seized to pay off the company’s debts. In an effort to quell the nascent fire, Coinbase CEO Brian Armstrong confirmed that the platform is not at risk of bankruptcy. However, he did not deny this, quite the contrary: "It is possible, although not likely, that the court will decide to consider the assets of clients as part of the company in the course of a bankruptcy proceeding." That's what was said.
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