Coinbase Customers Scared of Losing Funds
Coinbase recently filled a new form 10-Q because of a necessary process set up by the Security and Exchange Commission. The conditions brought forward SAB 121, which serves as a risk factor. This showed that Coinbase has a plan in place to safeguard the cryptocurrencies of its Prime and Custody customers, according to the information revealed in the report.
Retail clients and their crypto assets on the exchange, risk being lost if the company calls bankruptcy. A creditor that is not secured generally loses most of their investment if the company declares bankruptcy.
Since crypto-assets held by the company can generally be regarded as the business’s asset if it were to go bankrupt. If that were to happen, the crypto assets held by the company for its customers could be used in the bankruptcy process, which would lead to such customers being treated like unsecured clients.
Brian Armstrong tried to calm the fear of investors by apologizing for the lack of protection put in place for retail clients’ investments. He further stated that the investments of the customers are in no way in danger and that the exchange was not going bankrupt.
He added that they are updating their user terms for retail customers so that they will receive the same protections as corporate customers in the event of unexpected happenings. He also wished to express his regret for not having these in place earlier and he apologized for any inconvenience it may have caused.
Also, Caitlin Long, the CEO of Custodia Bank, mentioned in a tweet that recent happenings are not uncommon at all and it is caused by the problems brought by the laws implemented by the custodian.
Coinbase’s Current Situation
Investors were worried about Coinbase’s Q1 2022 earnings call released on the 10th of May. The exchange saw a 44% QoD reduction in the trade levels. This was in line with the recent happenings in the cryptocurrency market, where there have been cryptocurrency price changes in which billions were cleared out of the total market cap.
Coinbase stocks have dropped to a surprising value of $72, it is down by 70% compared to their price this time last year.