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What would happen if Coinbase went bankrupt? That would be rather catastrophic to the Crypto market wouldn't it? Do they have any obligation to give people acce

What would happen if Coinbase went bankrupt? That would be rather catastrophic to the Crypto market wouldn't it? Do they have any obligation to give people access to "their" crypto wallets?

paxys 4y ago
Nothing. Unless there's outright fraud those wallets will still exist regardless of the company's health. It's no different than any other traditional broker going out of business (which isn't common but does happen). People can just transfer their funds elsewhere.
- deleted 4y ago
  [deleted]
- JaimeThompson 4y ago
  >It's no different than any other traditional broker going out of business (which isn't common but does happen). There are tested procedures in place that are know to work when dealing with traditional brokers. The crypto space doesn't really have such things.
- mdasen 4y ago
  "Moreover, because custodially held crypto assets may be considered to be the property of a bankruptcy estate, in the event of a bankruptcy, the crypto assets we hold in custody on behalf of our customers could be subject to bankruptcy proceedings and such customers could be treated as our general unsecured creditors" That's from Coinbase's 10-Q filing (https://d18rn0p25nwr6d.cloudfront.net/CIK-0001679788/89c60d81-41a2-4a3c-86fb-b4067ab1016c.pdf https://d18rn0p25nwr6d.cloudfront.net/CIK-0001679788/89c60d8...). I don't necessarily think it's likely that customers would be treated as unsecured creditors, but it is possible as they note. At the very least, it seems likely that a court would need to determine (over the course of months) whether to release the crypto assets to the account holders. It seems likely that it wouldn't be as orderly as a traditional broker going out of business given that it's new ground to litigate. I do agree that it probably should be treated like any other broker, but I think there's a decent chance it'll take some time to work through courts. Coinbase has $256B in assets on its platform. I think its creditors would certainly see value in trying to claim that the crypto isn't like stocks or bonds held at a brokerage - enough value to tie it up for a good while with appeals. They also note that the theft or loss of private keys is a risk and they note that the value of crypto assets held by them is far greater than what they're insured for. While I'm sure Coinbase invests a lot in security, there's a lot of risk in transactions that can't be un-done. If an employee transfers money at a bank, the government and banks can un-do the transactions most of the time. Again, I'm not saying these are likely scenarios, but there's certainly risk as a Coinbase customer.
zitterbewegung 4y ago
On Coinbase’s website they have this : https://help.coinbase.com/en/coinbase/other-topics/legal-policies/how-is-coinbase-insured https://help.coinbase.com/en/coinbase/other-topics/legal-pol...
dahdum 4y ago
It would hurt the market but keep in mind they only handle 11% of crypto trading. They also have ~$6b in cash and are well managed, so going bankrupt any time soon doesn't seem likely.
bdcravens 4y ago
What's Coinbase's share of stored crypto relative to Mt. Gox's when it declared bankruptcy? As for obligations, each customer would be a creditor of Coinbase, and have the same claims as any other creditor.
nus07 4y ago
https://twitter.com/TheWinklerGroup/status/1524138329633132545?t=elsN3hTFkYPo4xfeKTvqbA&s=19 https://twitter.com/TheWinklerGroup/status/15241383296331325...

What would happen if Coinbase went bankrupt? That would be rather catastrophic to the Crypto market wouldn't it? Do they have any obligation to give people access to "their" crypto wallets?

paxys 4y ago

Nothing. Unless there's outright fraud those wallets will still exist regardless of the company's health. It's no different than any other traditional broker going out of business (which isn't common but does happen). People can just transfer their funds elsewhere.

deleted 4y ago
[deleted]
JaimeThompson 4y ago
>It's no different than any other traditional broker going out of business (which isn't common but does happen). There are tested procedures in place that are know to work when dealing with traditional brokers. The crypto space doesn't really have such things.
mdasen 4y ago
"Moreover, because custodially held crypto assets may be considered to be the property of a bankruptcy estate, in the event of a bankruptcy, the crypto assets we hold in custody on behalf of our customers could be subject to bankruptcy proceedings and such customers could be treated as our general unsecured creditors" That's from Coinbase's 10-Q filing (https://d18rn0p25nwr6d.cloudfront.net/CIK-0001679788/89c60d81-41a2-4a3c-86fb-b4067ab1016c.pdf https://d18rn0p25nwr6d.cloudfront.net/CIK-0001679788/89c60d8...). I don't necessarily think it's likely that customers would be treated as unsecured creditors, but it is possible as they note. At the very least, it seems likely that a court would need to determine (over the course of months) whether to release the crypto assets to the account holders. It seems likely that it wouldn't be as orderly as a traditional broker going out of business given that it's new ground to litigate. I do agree that it probably should be treated like any other broker, but I think there's a decent chance it'll take some time to work through courts. Coinbase has $256B in assets on its platform. I think its creditors would certainly see value in trying to claim that the crypto isn't like stocks or bonds held at a brokerage - enough value to tie it up for a good while with appeals. They also note that the theft or loss of private keys is a risk and they note that the value of crypto assets held by them is far greater than what they're insured for. While I'm sure Coinbase invests a lot in security, there's a lot of risk in transactions that can't be un-done. If an employee transfers money at a bank, the government and banks can un-do the transactions most of the time. Again, I'm not saying these are likely scenarios, but there's certainly risk as a Coinbase customer.

zitterbewegung 4y ago

On Coinbase’s website they have this : https://help.coinbase.com/en/coinbase/other-topics/legal-policies/how-is-coinbase-insured https://help.coinbase.com/en/coinbase/other-topics/legal-pol...

dahdum 4y ago

It would hurt the market but keep in mind they only handle 11% of crypto trading. They also have ~$6b in cash and are well managed, so going bankrupt any time soon doesn't seem likely.

bdcravens 4y ago

What's Coinbase's share of stored crypto relative to Mt. Gox's when it declared bankruptcy? As for obligations, each customer would be a creditor of Coinbase, and have the same claims as any other creditor.

nus07 4y ago

https://twitter.com/TheWinklerGroup/status/1524138329633132545?t=elsN3hTFkYPo4xfeKTvqbA&s=19 https://twitter.com/TheWinklerGroup/status/15241383296331325...