If Coinbase Goes Out of Business, Customers Could Be Ruined

The crypto exchange platform Coinbase is not doing well. In the event of bankruptcy, customers may not get their money back.

Coinbase is doing poorly. On Tuesday, the Nasdaq-listed crypto exchange platform released its first quarter 2022 financial results. The least we can say is that the results are not up to par. Since the company is a net profit of $1.60 billion last year, the numbers fell to just $1.17 billion between January and April. The number of transactions has also fallen dramatically, with a total estimated volume of 309 billion for 9.2 million active users, compared to 335 billion and 11.4 million users in 2021.

Is Coinbase Going Bankrupt?

According to the company, these declining numbers are explained by several correlated factors, ranging from its entry into the Nasdaq in April 2021 to a complicated economic context for cryptocurrencies, whose price was heavily impacted by the Russo-Ukrainian war. In the press release, the company explains: “These market conditions had a direct impact on our first quarter results. But we have approached these market conditions with foresight and preparation, and we remain more excited than ever about the future of cryptocurrencies.”

As of the top of its 10th anniversary, Coinbase has no intention of going out of business. The company also believes that the poor quarterly results “not permanent“, and that it is considering a long-term growth plan, based in particular on its recent arrival in the NFT market, with the launch less than a month ago of its marketplace dedicated to non-fungible tokens.

Are customers at risk of bankruptcy?

More than the potential collapse of Coinbase, the platform’s customers are mostly concerned about the future of their crypto portfolio in the event of bankruptcy. It must be said that the company’s quarterly report filed with the SEC is not particularly reassuring. In particular, it indicates that the assets deposited by its clients: “may be treated as assets subject to bankruptcy proceedings and customers may be treated as general unsecured creditors”.

Specifically, this means that if Coinbase is declared bankrupt, his customers’ money can also disappear† Indeed, under a moratorium, the crypto assets present in user accounts could be used to repay the company’s creditors. A worrying situation, which logically led some to withdraw their assets from the platform. For his part, the boss of the firm Brian Armstrong spoke on Twitter to reassure the crowd, assuring: “Your money is safe with Coinbase, as always. (…) We do not run the risk of bankruptcy”.

Despite the reassuring words, the company admits that it poorly explained the protective measures in connection with a possible bankruptcywhich would particularly affect certain users who do not take advantage of a premium service that offers solid legal guarantees. “We should have updated our terms of sale sooner,” admits Brian Armstrong.

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