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> It’s funny to see people shocked (SHOCKED!) when crypto doesn’t have the protections of regular banking and investments. That’s why you don’t invest with stuf

> It’s funny to see people shocked (SHOCKED!) when crypto doesn’t have the protections of regular banking and investments. That’s why you don’t invest with stuff that isn’t insured. Those aren’t real rates, they are risk adjusted rates for not having insurance. You are missing the point. We are shocked that even if Coinbase keeps users' deposits 100% safe, users could still lose their deposits if a judge decides so. Why isn't there a way to segregate those deposits from assets on which creditors have a claim? This kind of simple arrangement ought to be possible without new regulations or FDIC-style protection. Needless to say, "not your keys not your Bitcoin" continues to be good advice.

JoeAltmaier 5y ago
Bankruptcy rules are weird, and it's not just crypto companies that work that way. Lots of uninsured companies could lose depositors' accounts in bankruptcy. Witness grain elevators, or storage companies, or safe deposit companies - it took special laws to protect depositors. Which protection Coinbase doesn't have, apparently. It's always more nuanced than first glance. And (rich) creditors have always had more sway in court than common depositors, unless special rules are enacted that say otherwise.
- olalonde 5y ago
  It's weird indeed. I admit I believed there was a law that protected depositors (in general) from creditors in the event of a bankruptcy. Are you saying that there's a law that's specifically for grain companies, one specifically for safe deposit companies, etc.? What if you park your car in a garage which goes bankrupt, can you lose your car? I'm kind of mind blown right now...
svnt 5y ago
Sorry to say it, but no, you. You are missing the point. The regulations on banking created and enforce those legally binding separations in assets that you are shocked don’t exist.
- olalonde 5y ago
  Seems like a more robust solution would be to just fix the bad bankruptcy laws instead of "regulating" every possible variant of "company has custody of X which is actually owned by customer Y". There ought to be a simple way to declare: "this is not company property and is off limits to company creditors in the event of a liquidation".
  - prepend 5y ago
    These aren’t bad bankruptcy laws. They are actually good and protect things that are most important- bondholders and higher priority creditors. I don’t think letting companies set their own creditor priorities would really be feasible if we want to have predictable securities markets. I assume that if we let companies protect certain assets from creditors during bankruptcy they would set aside massive bonuses and all sorts of other shenanigans.
prepend 5y ago
Coinbase could purchase and maintain insurance against such an act. That’s what E*Trade/etc do to protect against the same risk should they go into bankruptcy.

JoeAltmaier 5y ago

Bankruptcy rules are weird, and it's not just crypto companies that work that way. Lots of uninsured companies could lose depositors' accounts in bankruptcy. Witness grain elevators, or storage companies, or safe deposit companies - it took special laws to protect depositors. Which protection Coinbase doesn't have, apparently. It's always more nuanced than first glance. And (rich) creditors have always had more sway in court than common depositors, unless special rules are enacted that say otherwise.

olalonde 5y ago
It's weird indeed. I admit I believed there was a law that protected depositors (in general) from creditors in the event of a bankruptcy. Are you saying that there's a law that's specifically for grain companies, one specifically for safe deposit companies, etc.? What if you park your car in a garage which goes bankrupt, can you lose your car? I'm kind of mind blown right now...

svnt 5y ago

Sorry to say it, but no, you. You are missing the point. The regulations on banking created and enforce those legally binding separations in assets that you are shocked don’t exist.

olalonde 5y ago
Seems like a more robust solution would be to just fix the bad bankruptcy laws instead of "regulating" every possible variant of "company has custody of X which is actually owned by customer Y". There ought to be a simple way to declare: "this is not company property and is off limits to company creditors in the event of a liquidation".
- prepend 5y ago
  These aren’t bad bankruptcy laws. They are actually good and protect things that are most important- bondholders and higher priority creditors. I don’t think letting companies set their own creditor priorities would really be feasible if we want to have predictable securities markets. I assume that if we let companies protect certain assets from creditors during bankruptcy they would set aside massive bonuses and all sorts of other shenanigans.

prepend 5y ago

Coinbase could purchase and maintain insurance against such an act. That’s what E*Trade/etc do to protect against the same risk should they go into bankruptcy.