Brian Armstrong Says Coinbase is in No Risk of Bankruptcy
Even after a Black Swan event that saw Bitcoin fall below $30,000 on Tuesday for the very first time since mid 2021, Chief Executive Officer Brian Armstrong claimed there is no risk of insolvency for Coinbase, the biggest U.S. crypto exchange platform.
Brian Armstrong made his remarks following Coinbase’s announcement on Tuesday that, in the case of bankruptcy, cryptocurrency assets held by the exchange might be allowed to own property of the bankruptcy proceedings, and clients could be classed as general debt holders.
A private key, which seems to be a long sequence of characters that functions as a password, governs entry to a crypto wallet. The bitcoin in the wallet cannot be accessed without the key. Coinbase retains the private key and allows customers to access the funds in the wallet and use a more traditional password. The configuration makes it possible for users to access their accounts by requiring them to remember a simpler password.
Coinbase, whose shares fell 15% in extended trading on Tuesday, also failed revenue projections for the first quarter and announced a loss as market volatility dampened investor interest for higher-risk assets such as cryptocurrency.
“We believe our Prime and Custody customers have strong legal protections in their terms of service that protects their assets, even in a black swan event like this. This disclosure makes sense in that these legal protections have not been tested in court for crypto assets specifically.”
“We should have updated our retail terms sooner, and we didn’t communicate proactively when this risk disclosure was added. My deepest apologies.”–Brian Armstrong on Twitter
Coinbase provides a self-custody wallet called Coinbase Wallet, in which the user knows their private key, but a Coinbase Wallet or other crypto wallet is not needed to trade cryptocurrency on Coinbase. However, by conceding that digital currencies are not safe in the case of bankruptcy, Coinbase highlights a significant distinction between storing funds with blockchain platforms and retaining cash with conventional banking.
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