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If this was a brokerage with stocks, the customers own those stocks. There is no reason crypto shouldn't be the same. There is no reason crypto shouldn't have

If this was a brokerage with stocks, the customers own those stocks. There is no reason crypto shouldn't be the same. There is no reason crypto shouldn't have top priority to their owners. It isn't okay for a company to put other creditors above the owners of that crypto

ceejayoz 4y ago
Stocks in brokerages are safe in part because the SIPC exists. Being a priority creditor doesn’t help if, say, someone siphoned off all the Bitcoin.
- AdamN 4y ago
  SIPC is just the framework. The primary thing is that customer assets are held in custodian accounts and not intermingled with the brokerage assets themselves. This is different than a bank which can lose your money if it does go bankrupt - it's just that FDIC steps in and makes whole the customers that qualify for the insurance (and pays out to other customers above the limits first before other creditors).
  - ceejayoz 4y ago
    No, the SIPC, like the FDIC, can step in and make people whole if assets go missing. FDIC's for deposit accounts, SIPC is the equivalent for brokerage assets. https://www.sipc.org/about-sipc/sipc-mission https://www.sipc.org/about-sipc/sipc-mission "SIPC oversees the liquidation of member firms that close when the firm is bankrupt or in financial trouble, and customer assets are missing." In Coinbase's case, holding in a custodian account doesn't save them if the Bitcoin in it gets sent to an attacker's wallet. They're just gone, and neither the SIPC nor FDIC cover that asset class.
  - Animats 4y ago
    This is not entirely true, especially if you have a margin account. In the US, there is Government insurance up to the SIPC limit of $500,000 of securities and $250,000 of cash. But coverage ends at that point. I have had the annoying experience of having to pry restricted stock certificates out of the vaults of a failed broker. Fear of the regulatory agencies is strong enough that a week of phone calls produced the certificates.
JumpCrisscross 4y ago
> this was a brokerage with stocks, the customers own those stocks Sort of. Most individuals' shares are held in "street name,"[1][2]. You have a claim against the broker for those shares, but that could be impaired if the broker went under. Losses are rare because American brokers are highly regulated. Coinbase has fought vigorously against being similarly regulated [3]. [1] https://www.sec.gov/fast-answers/answersstreethtm.html https://www.sec.gov/fast-answers/answersstreethtm.html [2] https://www.sec.gov/reportspubs/investor-publications/investorpubsholdsechtm.html https://www.sec.gov/reportspubs/investor-publications/invest... [3] https://www.marketwatch.com/story/coinbase-proposes-crypto-focused-financial-regulator-to-replace-sec-for-oversight-of-digital-assets-11634235099 https://www.marketwatch.com/story/coinbase-proposes-crypto-f...
- bombcar 4y ago
  If you look closely you’ll find that the broker and the holding company have similar but distinct names - it’s supposed to be setup so that if the broker goes under the holding company can be transferred and continue. Similar to banks and FDIC the financial industry is good at this kind of thing and brokers can go bankrupt without customers ever really noticing.
nradov 4y ago
You don't seem to understand how bankruptcy works. Creditor seniority is set by the court, following the bankruptcy code. The insolvent company has very little control over that process.

ceejayoz 4y ago

Stocks in brokerages are safe in part because the SIPC exists. Being a priority creditor doesn’t help if, say, someone siphoned off all the Bitcoin.

AdamN 4y ago
SIPC is just the framework. The primary thing is that customer assets are held in custodian accounts and not intermingled with the brokerage assets themselves. This is different than a bank which can lose your money if it does go bankrupt - it's just that FDIC steps in and makes whole the customers that qualify for the insurance (and pays out to other customers above the limits first before other creditors).
- ceejayoz 4y ago
  No, the SIPC, like the FDIC, can step in and make people whole if assets go missing. FDIC's for deposit accounts, SIPC is the equivalent for brokerage assets. https://www.sipc.org/about-sipc/sipc-mission https://www.sipc.org/about-sipc/sipc-mission "SIPC oversees the liquidation of member firms that close when the firm is bankrupt or in financial trouble, and customer assets are missing." In Coinbase's case, holding in a custodian account doesn't save them if the Bitcoin in it gets sent to an attacker's wallet. They're just gone, and neither the SIPC nor FDIC cover that asset class.
- Animats 4y ago
  This is not entirely true, especially if you have a margin account. In the US, there is Government insurance up to the SIPC limit of $500,000 of securities and $250,000 of cash. But coverage ends at that point. I have had the annoying experience of having to pry restricted stock certificates out of the vaults of a failed broker. Fear of the regulatory agencies is strong enough that a week of phone calls produced the certificates.

JumpCrisscross 4y ago

> this was a brokerage with stocks, the customers own those stocks Sort of. Most individuals' shares are held in "street name,"[1][2]. You have a claim against the broker for those shares, but that could be impaired if the broker went under. Losses are rare because American brokers are highly regulated. Coinbase has fought vigorously against being similarly regulated [3]. [1] https://www.sec.gov/fast-answers/answersstreethtm.html https://www.sec.gov/fast-answers/answersstreethtm.html [2] https://www.sec.gov/reportspubs/investor-publications/investorpubsholdsechtm.html https://www.sec.gov/reportspubs/investor-publications/invest... [3] https://www.marketwatch.com/story/coinbase-proposes-crypto-focused-financial-regulator-to-replace-sec-for-oversight-of-digital-assets-11634235099 https://www.marketwatch.com/story/coinbase-proposes-crypto-f...

bombcar 4y ago
If you look closely you’ll find that the broker and the holding company have similar but distinct names - it’s supposed to be setup so that if the broker goes under the holding company can be transferred and continue. Similar to banks and FDIC the financial industry is good at this kind of thing and brokers can go bankrupt without customers ever really noticing.

nradov 4y ago

You don't seem to understand how bankruptcy works. Creditor seniority is set by the court, following the bankruptcy code. The insolvent company has very little control over that process.