What happens if a cryptocurrency exchange files for bankruptcy?
creditslips.org
creditslips.org
“The big point here is the if you are a customer of a cryptocurrency exchange, you risk being a general unsecured creditor of the exchange if it should file for bankruptcy. It doesn’t matter that the exchange’s contract with you says that you “own” the currency. That’s not determinative of what will happen in bankruptcy. If you’re a cryptocurrency exchange customer you’re actually in a worse position than if you dealt with a traditional financial institution for a bank deposit or security, as the exchange is not regulated for safety-and-soundness and there’s no insurance protecting your assets.”
Personal disclosure: extreme crypto skeptic
This has already happened on a massive scale with MtGox in Japan. That unwind closely resembled a traditional corporate bankruptcy liquidation. Many other smaller exchanges have failed in a disorderly manner due to hacks and exit scams.
Not all exchanges are completely unregulated. US based exchanges all fall under scrutiny of "money transmitter" regulators. Coinbase is also regulated as a digital asset company by New York. Coinbase mentions in their TOS that USD deposits are kept in FDIC insured accounts kept separate from corporate funds. Their Crypto assets are not segregated however, which is surprising.