Coinbase Global Inc (NASDAQ:COIN) said customers could lose their cryptocurrency if the crypto exchange were to ever go bankrupt, further depressing
Coinbase Global Inc (NASDAQ:COIN) said customers could lose their cryptocurrency if the crypto exchange were to ever go bankrupt, further depressing its share price.
“In the event of a bankruptcy, the crypto assets we hold in custody on behalf of our customers could be subject to bankruptcy proceedings,” the company said in its first-quarter earnings report.
As a result, traders would lose access to any cryptocurrency held on the exchange as it would become Coinbase’s property.
Coinbase chief executive, Brian Armstrong, took to Twitter in an attempt to reassure investors that their funds were safe, adding the disclosure was included because of recent rules implemented by the US Securities and Exchange Commission.
“This disclosure makes sense in that these legal protections have not been tested in court for crypto assets specifically, and it is possible, however unlikely, that a court would decide to consider customer assets as part of the company in bankruptcy proceedings even if it harmed consumers,” Armstrong tweeted.
The company also sought to reassure its customers.
“First (and most importantly) your funds are safe, and they always will be. Second, our business is healthy and we are staying the course. We will never waver in our commitment to you and have never been more excited to build the future with you,” the company said on Twitter.
According to Insider, it is the first time that the company has ever mentioned the risk factor of going bankrupt, and what that would mean for traders with holdings on the exchange.
Due to being decentralised and unregulated, should Coinbase go bankrupt, investors will not be able to rely on insurance to protect their money like they can with assets held with traditional banks.
Shares in Coinbase tumbled 26% to US$53.72. The shares have slumped 79% this year as major cryptocurrencies have come under pressure.
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