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How do cryptocurrency exchanges deal with bankruptcy?

On Behalf of | Jul 6, 2022 | Consumer bankruptcy |

Many individuals throughout Tennessee are investing in a new type of money: cryptocurrency. To capitalize on the popularity of this digital asset, many cryptocurrency exchanges now exist to help people trade and store all sorts of digital currencies. With that said, a recent form filed by a large cryptocurrency exchange has lots of investors feeling uncertain about this area.

Coinbase’s recent disclosure

In May 2022, popular cryptocurrency exchange Coinbase filed a 10-Q Form with the SEC. This form stated that, in the event Coinbase files for bankruptcy, it could include over $250 billion in fiat currencies and cryptocurrency in its bankruptcy estate. If this happens, Coinbase’s customers might act as unsecured creditors.

Coinbase’s disclosure also stated that its customer contracts don’t limit liability concerning security breaches. Plus, in the event of a bankruptcy, Coinbase stated its insurance might not cover all of its potential losses. This news understandably put many customers of this popular cryptocurrency exchange on edge.

Coinbase’s official response about its disclosure

After news of Coinbase’s recent $430 million loss and a possible bankruptcy looming, the company’s CEO took to Twitter to issue his official response. He stated that Coinbase’s disclosure didn’t mean it was going bankrupt. Instead, he stated that this company’s disclosure was in response to a recent SEC Accounting Bulletin. While that might be the case, the response hasn’t garnered a lot of faith in Coinbase from social media.

Wrapping things up, popular cryptocurrency exchange Coinbase recently released a disclosure that had many of this company’s customers concerned. While there’s no official news about Coinbase going bankrupt, a recent rough patch in the cryptocurrency realm has many wondering if this exchange could soon have bad news for its customers.