For Coinbase the funds of individuals are not in danger | Coinbase

Reaffirming the safety of retail investor funds at Coinbase, the cryptocurrency exchange’s chief financial officer, Alesia Haas, said on Friday that all investor assets are “absolutely sure“.

A “tail risk” for Coinbase investors

The CFO was asked if it was possible for the courts to force Coinbase to divert customer money to its creditors. She replied that if it were to happen, there is a very low risk that it could happen.

The clarification follows a recent disclosure that suggested that if Coinbase were to go bankrupt, it could treat its customers as “unsecured creditors.”

There are two layers of protection for Coinbase investors – operational controls and legal protection. Each client’s assets are segregated and held separately in their name on our ledgers. And the money is directed by the client and we do not re-mortgage any funds.

Funds are not in danger

Ms Haas added that, therefore, there is no risk of a possible “rush” on Coinbase. She explains that the legal protections are clearly spelled out in the terms of service with customers.

We clarify that it is the client’s asset that we hold on their behalf. The reason we made this disclosure is to point out that there may be some residual risk. The possibility of bankruptcy is unlikely because we have six billion in cash.

Stating that the confusion arose from the inclusion of a new risk factor based on an SEC requirement, Coinbase CEO Brian Armstrong tweeted,

We have no bankruptcy risk, however we have included a new risk factor based on an SEC requirement called SAB 121. This is a newly required disclosure for public companies that hold crypto assets for some thirds.

Stating that crypto is a whole new fledgling industry, Haas said there is no case law regarding crypto bankruptcy. Keeping in mind the nature of the risk factors, we felt there could be residual risk for Coinbase investors in the unlikely event of bankruptcy, she said.

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