Coinbase Has No Risk Of Bankruptcy, New 10-Q Disclosure Language Is An SEC Requirement, Says CEO Armstrong

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Coinbase Founder and CEO Brian Armstrong said in a tweet Wednesday this new language found in his latest 10-Q file is simply a new requirement from the United States Securities and Exchange Commission and that Coinbase is not in danger of bankruptcy.

  • Armstrong said the exchange had “included a new risk factor based on an SEC requirement called SAB 121which is a new disclosure requirement for public companies that hold crypto assets for third parties.”

  • The 10-Q, filed with the SEC on Tuesday, states, “Because crypto assets held in custody may be considered property of bankruptcy estate, in the event of bankruptcy, the crypto assets we hold in custody in name of our customers could be subject to bankruptcy proceedings and such customers could be treated as our general unsecured creditors,” Coinbase wrote in its recent filing.

  • Coinbase also revealed that this means customers may think keeping their coins on the platform would be considered “riskier”, which in turn would have a big impact on its financial situation.

  • In the event of bankruptcy, a general unsecured creditor would be considered to have the most to loseas they are last in line for claims.

  • “We believe our Prime and Custody customers have strong legal protections in their Terms of Service that protect their assets, even in a black swan event like this,” Armstrong wrote in the tweet. “This disclosure makes sense as these legal protections have not been tested in court for crypto assets specifically.

  • Caitlin Long, founder and CEO of digital asset bank Custodia Bank (formerly known as Avanti) said in a tweet that this is nothing new and an inherent problem with the regulatory structure used. by most dealers.

  • “Wyoming solved this problem by creating a new user-friendly structure designed to respect the separation of client assets in the event of bankruptcy: the Wyoming Special Purpose Depository Institution,” she said.

  • Coinbase stock is trading at $72, down 70% year-to-date.

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