Cryptocurrency exchange Coinbase is desperately attempting to ease customer nerves after it was caught up in a storm over claims users would lose all their money if the platform went bankrupt.
In a disclosure within its recent first-quarter earnings report, Coinbase stated users could lose access to their holdings in the event of the company going bust. The text was also interpreted in several reports as saying Coinbase would, essentially, use its customers’ investments to fund and navigate its way through bankruptcy.
The passage which created the storm read: “Because custodially held crypto assets may be considered to be the property of a bankruptcy estate, in the event of a bankruptcy, the crypto assets we hold in custody on behalf of our customers could be subject to bankruptcy proceedings and such customers could be treated as our general unsecured creditors.”
Presented against the backdrop of a concerning earnings report which saw a net loss of $420m for the first three months of 2022, the prospect of what to expect in the event of bankruptcy fell sharply into focus. The situation was further inflamed by the company’s stock plummeting by almost a quarter of its value.
Coinbase’s CEO – Brian Armstrong – briefly took to Twitter earlier this week to assure users there was no risk of bankruptcy, and all was well.
However, another dip in cryptocurrency prices across the board did little to ease the concerns permeating an already nervous market, so Armstrong yesterday issued further explanations and reassurances directly to customers through Coinbase’s website.
“As we’ve said for years in our User Agreement with you (Section 2.6.1.) your assets are just that – yours,” the statement read.
“Not ours or anyone else’s. Customer retail funds are and always will be accounted for entirely separately from our corporate accounts. We’ll say it again. Your funds are your own. They have been and always will be accounted entirely separately from our corporate accounts.
“Second, our business is healthy and we are committed to crypto for the long-haul.
“Market conditions have changed due to a large number of factors, and their impact extends beyond crypto and tech. Our balance sheet remains healthy and we will continue to invest in the products and ventures that will create better experiences and value for our users.
“Coinbase was founded in 2012 and we’ve emerged from every single cycle to date stronger and more focused on our customers. We will never waver in our commitment to the security of your funds that you’ve entrusted to our platform.”