A recent Coinbase earnings report revealed a pretty unattractive risk factor for users of the platform. The company confirmed that, in the case of bankruptcy, Coinbase users could lose access to the cryptocurrency assets that they bought on the platform.
The recent earnings report (PDF) was the first time that Coinbase mentioned anything regarding this possible risk. The risk involves the custodially held crypto assets that users purchase, but the company continues to hold.
Coinbase does offer the option for users to hold their own crypto assets in a self-custody wallet, aptly called Coinbase Wallet. But despite this, the company confirmed that it holds around $256 billion in virtual coins.
“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,” the company said in its earnings report.
The company’s CEO, Brian Armstrong, took to Twitter to try and put out the dumpster fire (Coinbase stock dropped around 28 percent after releasing the report).
Armstrong shared a massive thread on his own Twitter page to ensure users that their funds are safe in Coinbase. The company currently has no risk of bankruptcy, according to Armstrong. Additionally, Coinbase will continue to work to improve customer protections.
1/ There is some noise about a disclosure we made in our 10Q today about how we hold crypto assets. Tl;dr: Your funds are safe at Coinbase, just as they’ve always been.
— Brian Armstrong – barmstrong.eth (@brian_armstrong) May 11, 2022
But this revelation isn’t something to just sweep under the rug. In fact, the company holds billions of dollars of assets for its users.
And if the company goes down, then those customers could lose it all. If you use Coinbase, it might be time to start holding your own crypto assets in the self-custodial Coinbase Wallet.
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