Thursday, May 26

Coinbase warns cryptocurrency owners might end up with zero as they lack bankruptcy protections

Coinbase missed its earnings targets and its shares fell by nearly a quarter of their value. Its CEO, Brian Armstrong, has said that the company is far from being considered a bankruptcy risk and assures that the funds are safe, but, at par.

He has also commented that due to the regulation in which they operate, if a bankruptcy event were to occur one day, users would lose access to their accounts and the funds would automatically become part of the company so that it could fulfill its obligations.

This is not the company’s decision, but it is obliged to use the funds it retains to cover its debts in the event of bankruptcy.

A pending regulatory issue

As Business Insider explains, that is not the model that occurs when a bank declares bankruptcy since the regulation protects up to a certain limit of amounts for its users, similar to what happens in Mexico with the IPAB.

While Coinbase says there is no risk for investors at the moment, it does bring to the table one of the inevitable issues when it comes to exchange regulation and user protection, one that is still pending in our country.

Armstrong also said that he trusts that Coinbase’s terms and conditions will be modified soon so that, in a possible bankruptcy case, the funds can be safeguarded and not taken to fulfill the company’s obligations.

Given that at the moment no protection is provided in its terms and conditions, the CEO apologized to users via Twitter.

Armstrong ended by saying that Coinbase’s ultimate goal is to offer the best cryptocurrency custody solutions

The drop in Coinbase’s stock value coincides with a generalized decline in the stock market and specifically in the technology sector.

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Cryptocurrencies have been dragged along with the downtrend and bitcoin has reached its $30,000 barrier, one not seen for almost a year. LUNA and TerraUST have also seen significant plunges of over 90% and 50% respectively.

Simultaneously to these movements Nubank has declared that it will allow to buy bitcoin and ethereum in Brazil directly in its app.

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