Coinbase's 10-Q update: users' crypto asset could be subject to bankruptcy claim
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https://news.ycombinator.com/item?id=30229324
> Custodially Held Crypto Currency Is Likely Property of the Bankruptcy Estate
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> Any failure by us or our partners to maintain the necessary controls or to manage customer crypto assets and funds appropriately and in compliance with applicable regulatory requirements could result in reputational harm, litigation, regulatory enforcement actions, significant financial losses, lead customers to discontinue or reduce their use of our and our partners’ products, and result in significant penalties and fines and additional restrictions, which could adversely impact our business, operating results, and financial condition. 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. This may result in customers finding our custodial services more risky and less attractive and any failure to increase our customer base, discontinuation or reduction in use of our platform and products by existing customers as a result could adversely impact our business, operating results, and financial condition.
It's an asset (for some reason). That's what happens to assets when you file bankruptcy.
What do you think happens when a bank collapses? Your money is magically protected?
Kind of like the banks back in ‘09 making their depositors take a haircut to ensure the bank didn’t go under. Nobody really complained because it was the offshore banks where oligarchs and such hide their money and they received ‘ownership’ in return for them stealing their deposits.
I think it's fair to expect users to know the coins they buy might lose value, but this is a bizarre and unexpected risk. It's clear from this thread that hardly anyone thought to consider this risk because they are trading off the expectations created by other, better regulated institutions (namely domestic banks).
Edit: I may have misread your intentions, when I wrote this I thought you were saying this arrangement was OK because it has happened elsewhere.
“Invest in Crypto, by giving us $100 with which we will buy $100 worth of BTC that we own.”
How is that not weird and who would follow a QR code on their TV ago “Invest in crypto” if this was at the top of the page they opened?
People would prefer to store crypto in the first type of institution.