the cryptos of its customers potentially at stake in the event of bankruptcy

The cryptocurrency exchange platform unveiled declining financial results. She has also been caught in the turmoil, as she indicates that the cryptos she holds on behalf of her clients may not automatically revert to them in the event of bankruptcy.

The American giant Coinbase is in bad shape. On Tuesday, the Nasdaq-listed cryptocurrency exchange released its results for the first quarter of the year. And what we can say is that the numbers are bad: its net income fell to 1.17 billion dollars in the first quarter, against 1.60 billion a year earlier, its total volume of transactions has dropped to 309 billion from 335 billion a year ago, and its number of monthly active users fell from 11.4 million to… 9.2 million.

The company explains these figures by the general context in the cryptocurrency market, with prices falling since the beginning of the year due, in particular, to its correlation to the Nasdaq, itself upset by a gloomy economic context. “These market conditions had a direct impact on our first quarter results. But we approached these market conditions with foresight and preparation, and we remain more excited than ever about the future of cryptocurrencies,” the company said.

Coinbase, which will celebrate its 10th anniversary this month, wanted to reassure investors. In her letter, she indicates that the market conditions “are not permanent”, specifying that she prefers to have a long-term strategy. Additionally, Coinbase discussed its recent investments, including its entry into the NFT market with the launch of the beta version of its NFT Marketplace.

Safe funds?

In its quarterly report filed with the SEC (the American stock market policeman), Coinbase also indicates that the cryptocurrencies held by the platform “could be considered assets subject to the bankruptcy procedure and customers could be treated as general creditors. unsecured. This could lead clients to find our custody services riskier and less attractive.”

A comment that made the community react strongly on social networks, prompting the boss of Coinbase, Brian Armstrong, to give more explanations. “Your funds are safe at Coinbase, as they always have been,” he said.

“We are at no risk of bankruptcy,” he wrote, admitting that his company had included “a new risk factor based on an SEC requirement, which is a new disclosure requirement for public companies that own crypto assets for third parties”.

He added that it was “possible, although unlikely, that a court would decide to consider client assets as part of the business in bankruptcy proceedings.” In other words, in the event of bankruptcy, it is possible that the crypto-assets held on behalf of certain Coinbase customers are used to pay off certain creditors of the company first.

In this context, if the company believes that while some of its customers, in particular those using its prime service, have solid legal protections, this is not the case for everyone. Coinbase has therefore indicated that it wishes to take protective measures for its retail customers. “We should have updated our retail terms earlier, and we did not proactively communicate when this risk disclosure was added,” he admits.

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