Coinbase CEO Brian Armstrong has clarified that the Securities and Exchange Commission mandated a new declaration in the company’s 10-Q filing, stating that customers might be treated as the company’s general unsecured creditors in the case of bankruptcy.
The confusing statement scared the cryptocurrency sector, prompting a popular tweet urging Bitcoiners to withdraw their holdings from exchanges.
Armstrong attempted to calm clients’ concerns by assuring them that their funds would remain secure. He adds that the company’s institutional clients are protected by “strong legal safeguards” in their terms of service. Coinbase has updated its Terms of Service for retail customers to provide the same level of protection.
However, he adds that if bankruptcy procedures are started, a court may consider user assets to be part of the company, causing customers to pay.
Armstrong believes that such a situation is unlikely since Coinbase is not at risk of going bankrupt. Simultaneously, he agrees that the company could have changed its Terms of Service for retail consumers sooner. For America’s biggest bitcoin exchange, this was a “positive learning experience.”
Coinbase’s stocks have taken a hit this year, dropping by more than 70%. They are predicted to fall another 15.67% to a new low of $61.55 when the market starts.
